House prices rise 15.5% in a year as third of house buyers reduce their budget
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House prices rise 15.5% in a year as a third of home buyers cut their budgets due to rising interest rates and a crisis in the cost of living
- House prices rose 15.5% in August, but the market is expected to soften even more
- A typical home now costs £292,000, up from £39,000 in the past year
- About 29% of potential buyers have said they are cutting their budget
- For those who rely on borrowing to buy, the figure jumps to half of buyers
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House prices in the UK have risen by £39,000 in the past year as reports suggest buyers are slashing their budget to allow them to make a purchase.
Despite rising interest rates and the cost of living crisis, high demand for homes and low inventory should support price increases.
According to the latest ONS house price index, the average house price in the UK has risen by 15.5 per cent in the period to July, bringing the average house price to £292,000.
Rising: UK house prices have risen £39,000 in the past year, ONS says
The strong increase is a clear difference from recent months, when house price inflation has declined. In June 2022, prices rose by 7.8 percent, according to the ONS.
The significant increase in house prices year-on-year in July was likely caused by the phasing out of the stamp duty holiday in June 2021, reducing the maximum possible tax saving from £15,000 to just £2,500.
Figures suggest that as a home’s price continues to rise, buyers are slashing their budgets as household finances are under pressure from rising costs elsewhere.
According to a Savills survey, nearly a third of potential buyers (29 percent) say they’ve cut their budgets in response to the increased cost of living.
This is most true for those who rely more on loans, including half (50 percent) of those looking to take the first step up the real estate ladder and 44 percent of those looking to grow.
The current climate has also dampened the appetites of movers. The net balance of people who are more motivated to move in the next three months has fallen to -1.7 percent, while a net balance of +7.1 percent feels more committed to moving in the coming year.
Average home prices in the UK have risen by £6,000 between June and July this year, compared to a £13,000 drop in the same months last year.
Annual rise: House prices continued to rise in July, rising 15.5% over the past 12 months to a new average price of £292,000
Tax cut impact: The sharp annual price increase is partly due to the end of the stamp duty holiday in June 2021, which caused prices to fall the following month
Andrew Montlake, general manager of mortgage brokerage, Coreco, said: ‘July data is skewed by the stamp duty holiday so should be taken with a grain of salt.
The reality is that the real estate market has slowly cooled in recent months as the country is gripped by an unprecedented crisis in the cost of living.
“We are also seeing valuers becoming more conservative due to strong economic headwinds. With more rate hikes, nailed-down security and the cost of living crisis set to worsen as we move into winter, the real estate market is likely to see modest price increases between now and spring.
‘Demand is also expected to decline in the coming months due to higher mortgage interest rates and the enormous pressure on household finances. But as always, the lack of supply will support prices and prevent a sharp drop.’
The rate on the average two-year fixed-rate mortgage is now 4.24 percent, the highest since January 2013 at around 2.24 percent – can expect their monthly payments to rise by more than £200.
Lack of supply remains a major problem for buyers. According to Savills, more than half of buyers (54 percent) say a lack of inventory significantly hinders their ability to buy a home. This is only a slight decrease from 63 percent in April.
Jeremy Leaf, North London broker and former housing chairman of RICS, says: ‘While the numbers are strong, even for this, the most comprehensive of all housing market surveys, it’s a little early to reflect the change in activity we have. seen. seen on the ground in recent months.
“The balance of power is shifting more towards the buyer, but what these numbers do show is that there is still plenty of underlying strength that makes a serious price correction less likely.
“There has been a slight softening and is likely to remain so for the coming months.”
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