Mortgages  

‘Out of sync’ house prices continue to rise

‘Out of sync’ house prices continue to rise
A woman looks at adverts in an estate agent window in south-west London (EPA-EFE/HANNAH MCKAY)

The property market is in a period of “madness” as house prices continue to grow despite rising interest rates, brokers have said.

House prices rose 1 per cent in May, the eleventh consecutive monthly rise, according to Halifax’s house price index.

Andrew Montlake, managing director at mortgage broker Coreco, said everything suggests prices should be coming down, and yet they are still rising.

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"The property market is out of sync with economic reality,” he said.

Inflation in the UK hit 9 per cent in May, with high food and energy prices sparking a cost of living crisis.

House prices rose 1 per cent in May

Experts were split on whether house price growth will continue at its current rate.

Montlake said the house price boom and “sellers' stranglehold on the market” will soon be over as inflation takes hold and people's confidence and spending power are hit for six. 

“The rate of price growth will almost certainly slow during the second half of 2022 and into 2023.”

Ross Boyd, founder of mortgage comparison platform, Dashly agreed, saying it may be that we are seeing a last rush of buyers get into a new home before the storm hits.

"Double digit house price growth as inflation approaches double digits is madness,” he said.

“The current rate of price growth, though slowing, simply cannot continue and the second half of the year could look significantly different to the first.”

Amey Hellen of Derby-based estate agents, Boxall Brown & Jones said it is certainly still a sellers’ market.

“As there is still a shortage of houses generally, the demand will remain strong even if economic conditions worsen,” she said.

“I think that prices at the end of the year will be similar to how they are now as demand is still so strong.”

Myron Jobson, senior personal finance analyst at Interactive Investor, said it could take years for the supply of homes to return to normal after housebuilding ground to a halt at the height of the pandemic.

“Rising mortgage rates, with the Bank of England having upped base rates four times in six months and appears set to go further, have also pushed many buyers to the sidelines,” he said.

“Those who have been priced out of the property market will hope the slowdown will ultimately lead to a fall in prices. 

“Rising borrowing costs coupled with more housing inventory could result in slower home price growth, but it could be some time before we see declines in prices.”

Northern Ireland and the south west of England saw the highest price inflation, with rises of 15.2 per cent and 14.5 per cent respectively.

Nine regions of the UK registered double-digit inflation, however in Scotland growth continues to underperform relative to the UK average, with annual inflation at 8.3 per cent.

Annual house price inflation in the UK is currently 10.5 per cent.