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House price growth jumps 11% in a year

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Written by: John Fitzsimons
02/08/2022
Annual house price growth rose to 11% in the 12 months to July, reaching an average price of £271,209.

The latest house price index from Nationwide Building Society found that annual growth over the year had moved from 10.7% in June. On a monthly basis, prices grew 0.1%, down from the 0.2% increase last month.

Robert Gardner, chief economist at Nationwide, noted that while there were “tentative signs of a slowdown in activity”, such as the dip in mortgage approvals for purchase in June, this had not yet fed through into price growth.

He said: “We continue to expect the market to slow as pressure on household budgets intensifies in the coming quarters, with inflation set to reach double digits towards the end of the year. 

“Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”

The survey follows data from the Royal Institution of Chartered Surveyors which found that new buyer enquiries have fallen for three straight months.

Heat in the housing market

Nicky Stevenson, managing director of Fine and Country, said increased borrowing costs and “shrinking consumer purchasing power” were yet to take the heat out of the housing market.

She said: “Buyers and sellers alike will now be watching closely this week to see if the Bank of England makes good on its threat to hike its base rate to 1.75% — the biggest increase for more than a quarter of a century.

“Cheap debt is fast disappearing and against this backdrop, many expect a period of more subdued house price growth later in the year.”

Reduction in growth

Jeremy Leaf, estate agent and former residential chairman of RICS, said it was something of a surprise that it was taking so long for the slowdown noticed in his firm’s offices to be reflected in the survey numbers.

He added: “Don’t get me wrong — we are seeing a reduction in growth, not a major correction as prices continue to be supported by lack of choice and a strong labour market. However, still-rising interest rates and cost-of-living pressures are likely to have an increasing impact in the next few months.”

Protection against rate rises

Mark Harris, chief executive of SPF Private Clients, noted that borrowers remained keen to secure fixed-rate deals ahead of the further increases in base rate that are expected in the months ahead.

He said: “Encouragingly, first-time buyer numbers remain strong, at 5% above pre-pandemic levels. This is likely to reflect significant financial input from the Bank of Mum and Dad, as deposit levels rise along with house prices and interest rates.

“Buy-to-let purchases are also on the rise as investors look for an alternative to stock market volatility for their investments, encouraged by higher rents.”

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