New data released by the Office for National Statistics (ONS) indicates that house prices fell by 1.1% between December and January, with average house prices increasing by 6.3% year-on-year in January, down from 9.3% in December. The average house price reached £290,000, £17,000 higher than the previous year. London house prices climbed to £534,000, but experienced a lower growth rate of 3.2% annually. Flats saw a price increase of 2.3%, while semi-detached houses rose by 7.5%. New-build property prices surged by 22.3%.
In 2022, full-time employees in England and Wales could expect to spend 8.3 and 6.2 times their annual earnings, respectively, when purchasing a home. Propertymark Chief Executive Nathan Emerson noted that while the ONS data reflects the time of the mini-budget, more recent market data presents a more positive outlook. Estate agents reported a 50% increase in sales agreements in January, and as more homes become available, competition and prices are expected to decline to more sustainable levels.
Hargreaves Lansdown’s head of personal finance, Sarah Coles, described January as a difficult month for property due to increased mortgage rates. Affordability calculations reveal the impact of rising rates on buyer confidence, with larger mortgages required to buy a home. However, mortgage rates began to decrease from October, potentially restoring some confidence in the market.
Despite this, the Office for Budget Responsibility predicts that annual house price inflation will turn negative, with a potential 10% drop from the peak. The Bank of England reports that mortgage approvals for purchases have fallen for the fifth consecutive month. In addition, Zoopla found that home sellers are reducing prices by an average of £14,100 (4.5%) to sell their properties, and RICS continues to chart decreasing demand from buyers.
As a residential landlord, it’s crucial to monitor the ongoing fluctuations in the housing market and mortgage rates, and be prepared for potential impacts on rental demand and property values.
ONS House price data for January was released today: UK House Price Index: January 2023 – Office for National Statistics (ons.gov.uk)
It also released affordability data for 2022: Housing affordability in England and Wales – Office for National Statistics (ons.gov.uk)
