What’s Happening with House Prices?

Recent reports show that house prices across the UK were 12.8% higher in May compared to the previous, year taking the average house price in the UK to £283,496.

The data from the HM Land Registry House Price Index also revealed that house prices in the UK have risen by 1.2% since April 2022. These figures are against a backdrop of inflation reaching 9.4% in June, a 40-year high.

This latest rise in inflation has been driven by a 42.3% rise in the price of fuel year-on-year along with a 9.8% increase in the price of food and non-alcoholic drinks. The current economic conditions will begin to affect the housing market with a slowdown in the high growth we have seen over recent years. Rising mortgage rates and the increase in the cost of living will start to affect demand for the rest of the year. However, there is still a lack of supply in the housing market, and this will support prices even as there is pressure on household finances. Addressing the issue of limited stock is key, but a dip in demand over the next few months could see a slowdown in the housing market over the next few months. Energy price rises in October could further hamper the market with a reversal of prices in the autumn.

Here in Scotland, we saw an average 8.4% increase in house prices taking it to £220,870 in the year to May. This is the eleventh time prices have risen in the last twelve months taking the average house price £17,100 higher than the same period last year. There were 9,092 property transactions in 2022, this is the second-highest number of deals in this month over the last decade and with the highest number of May deals taking place before the pandemic in 2019.

Housing stock value

The value of homes in the UK is currently over £10 trillion resulting from a lack of supply which continues to drive up house prices. According to Zoopla, the value of housing stock has gone up by 15% (£1.3 trillion) since just before the start of lockdown in February 2020. This means that the average homeowner has ntted £48 per day in capital gains.

The report estimates or 32% of all properties (9.4 million homes), have grown in value by more than £50,000. Given that the average UK household income is £34,100 it means that house prices are generating more cash than salaries.