House Prices Bounce Back From First Dip of 2022

Following a dip in house prices over the summer, property is back on track this month with an increase in the average property price to £367,760 in September 2022 – a rise of 0.7% on the month before. The increase is a bounce back for the housing market after August saw its first decline in prices this year, with average prices dropping nearly £5,000 on the July average to £365,173.

The new average is a rise of 8.7% compared to this time last year and represents a 20% increase in buyer demand versus the pre-pandemic five year average.

Property market remains strong

The last few months have been difficult economically, with energy prices set to soar and the cost of living increasing. Despite interest rates now being at their highest level in 14 years, further increases in the base rate are predicted by most experts as the Bank of England struggles to get inflation under control.

Even though higher rates mean mortgages are becoming more expensive, the increase in house prices this month shows that the property market still has the capacity to absorb these rate rises and stay resilient in the face of economic uncertainty.

The government’s mini-budget on Friday (23 September) included cuts in stamp duty that mean that two-thirds of homes are now completely exempt from stamp duty for first-time buyers in England. These cuts should help to relieve some of the pressure on first-time buyers and stimulate the market further, keeping growth on track for the rest of the year.

Seasonal fluctuations ‘to be expected’

Although some people may worry that the current economic climate and increasing interest rates may have contributed to the summer dip, seasonal fluctuations in house prices are actually very normal and the drop in August of 1.3% was very much in line with the previous ten years.

There are several reasons for this, as Tim Bannister, Rightmove’s director of property science, explains: “A drop in asking prices is to be expected…as the market returns towards normal seasonal patterns after a frenzied two years, and many would-be home movers become distracted by the summer holidays.

“Indeed, for those that can, this may be their first summer holiday abroad since before the pandemic. Sellers who want or need to move quickly at this time of year tend to price competitively in order to find a suitable buyer fast, with some hoping to complete their move in time to enjoy Christmas in a new home.

“We’re still expecting price changes for the rest of the year to continue to follow the usual seasonal pattern,” says Bannister, “which means we’ll end year at around 7% annual growth, even with the wider economic uncertainty.”

Pete Mugleston, Online Mortgage Advisor’s managing director, adds: “Despite the ongoing cost-of-living crisis, the price growth – which is predominantly in the middle and high-end sectors – shows that those who can afford it are still actively moving, and their reasons for doing so (growing family, needing more space, etc.) remain the same. What’s more, while demand continues to outstrip supply as it is currently, it’s unlikely property prices will fall in the short-term.

“That being said, first-time buyers are facing more cost pressures than ever before – especially following the latest interest rate hike, where average monthly mortgage payments will jump for borrowers if lenders decide to pass on the 0.5% rise.

“However, with the government recently announcing a stamp duty tax cut, this may provide some additional support, which could lead to an increase in prospective buyers and ultimately stimulate more demand. From what we’ve seen so far, house prices have remained resilient during the cost-of-living crisis, and we can’t see the property market stabilising anytime soon.”