UK property prices up, but challenges ahead: report

09 Sep 2022

The average price of a UK home increased once again in August, although Britain’s largest lender warned of a “more challenging period” ahead for property valuation amid rising interest rates and the cost-of-living crisis. According to Halifax, the average price of a home was £294,260 in August, 0.4% higher than the previous month. It represents another record high. The price climb marked a return to an upward trajectory for prices, after they dropped in July for the first time in more than a year. The annual rate of house price growth dropped slightly, to 11.5% from 11.8% in July – the lowest level in three months. “House prices have so far proved to be resilient in the face of growing economic uncertainty,” said Kim Kinnaird, the director of Halifax mortgages. However, she went on to note that “industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity. With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected,” she concluded. The Halifax assessment comes as the UK’s largest housebuilder, Barratt Developments, said in its annual results statement on Wednesday that the number of homes reserved by buyers each week had fallen and was now below pre-pandemic levels. The firm expects that house price growth would moderate as a result. “We recognise that significant macroeconomic uncertainties remain, most notably around inflation, energy costs and interest rates, and their impacts on UK economic growth, employment, and consumer confidence and spending,” said chief executive David Thomas in a statement.

Rate hike

The Bank of England announced its biggest increase in interest rates in 27 years in early August, taking the UK base rate to 1.75% – a 13-year high – as it tries to cool-off red-hot inflation as gas prices drive up UK energy bills. The central bank’s monetary policy committee will next reassess interest rates next week, and it is likely to continue raising rates into next year.