House price growth slows as market ‘returns to reality’

House price growth slows as market ‘returns to reality’

UK house price growth was down 2.1 percentage points in October, pointing to a property market “finally coming back to reality”, according to brokers.

Annual house price growth in October was 10.2 per cent over the year, with the average price tag on a UK house now sitting at £268,349.

This growth was down from 12.3 per cent year-on-year growth the previous month, according to the latest Office for National Statistics data, prompting brokers to confirm a “transition” in the market.

Whilst other indexes have predicted subsequent rises in house price growth, this index factors in the two-month delay on property transaction completions. 

Towards the end of last month, HM Revenue & Customs reported property transactions fell by nearly half (48.4 per cent) in October, signalling the lowest house sales this month has seen in nine years.

"After a year of surreal, Dali-esque house price growth, the property market is finally coming back to reality,” said Lewis Shaw, founder of Mansfield-based broker Shaw Financial Services.

“Though prices won't collapse due to the shambolic number of houses being built, low stock, a resilient jobs market and exceptionally cheap borrowing rates, a cool down is now inevitable.

“The Omicron variant and rising inflation will further weaken consumer sentiment, which is a massive driver of housing transactions. Meanwhile, private rents continue to rise, putting more pressure on tenants."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, agreed the housing market is experiencing a “new normal at the coalface".

“Although a little historic, this [is the] most comprehensive of all the housing surveys [and] still shows quite clearly a market in transition,” Leaf explained.

“After recovering from the frenzy of the summer and early autumn, we are seeing a ’new normal’ at the coalface, reduced but still determined demand along with an expectation of improvement in supply if recent market appraisal requests are anything to go by."

With an interest rate rise to 0.25 per cent confirmed this week, some industry experts are anticipating a "difficult winter" ahead.

Miles Robinson, mortgages head at online mortgage broker Trussle, said: “Families are facing a steep rise in energy bills and an increase in the general cost of living. This squeeze in consumer spending will almost certainly impact people’s ability to save for deposits and ultimately move home. As such, we could well see house price growth begin to stall.

“ While it may seem small, an interest rate rise of just 0.25 per cent ...could add £324.48 onto the average mortgage per year.”