The factors signal that the rate of house price growth will slow through the rest of the year, but price declines are not anticipated.
House price growth remains strong by any measure. The levels of annual growth seen over the last couple of months are the highest since late 2007. There are signals now however that the impetus in the market is beginning to ease, although this will take some time to be reflected in the rates of annual house price growth, which are more a reflection of sales being agreed several months earlier.
Even so, we expect price growth to start to fall back, reflecting the fact that buyer demand is starting to normalise from record peaks, although it is crucial to highlight that demand levels are still more than 30% higher than the 5-year average. The market is still moving very quickly, but the time between listing a home for sale and agreeing a sale is starting to creep up, another signal that the market is moving back towards more normal conditions.
The economic outlook, and multiple base rate rises, will act as a drag on sentiment and activity as we move through the rest of the year, but activity levels so far this year still indicate transactions at 1.2 million across the UK. But we do expect the rate of price growth to ease – on a monthly basis price growth has already moderated. A continuation of this trend, with some monthly declines, will mean annual price growth will reach +3% by year end.
Rate of monthly house price growth falls to the lowest rate since December 2019, with average values up just +0.1% in May
Average house prices are up +8.4% on the year, taking the average value to £251,550.
Wales continues to lead price growth, up +11.4% on the year while London lags at 3.9%.
Emerging signs of impetus in the market slowing, with activity receding from record highs with sales agreed down 13% y.o.y.
Buyers expected to become more price sensitive as mortgage rates rise, leading to a slowing in the rate of price growth in H2.