No, the housing market didn’t dive in June: ONS House Price Index

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on the publication of the ONS House Price Index and HM Land Registry House Price Index, showing the housing market hasn’t dived.

Key points from the publications:

Average house prices were up just 7.8% in the year to June – a big drop from 12.8% in May.
However, they rose an average of £3,000 during the month.
The average price hit a record £286,000 – up £20,000 in a year.
The stamp duty holiday has distorted the annual figure.

Sarah Coles says:

“A chill wind seemed to blow through the housing market in June, with annual price rises dropping like a stone. But this isn’t the impact of a widespread case of cold feet among buyers, and it’s not the start of a market crash – it’s largely a distortion caused by the stamp duty holiday last year.

“A huge part of the drop is due to the fact that it’s compared to last June – when price rises hit a peak. This was when the most generous period of the stamp duty holiday was coming to an end, and people dashed to take advantage – vastly inflating prices. The tax break then continued to distort the market for months.

“It meant price rises plummeted to 7.1% last July, because so many people had brought purchases forward. Then they rose to 11.7% two months later, when the stamp duty holiday finally ended, and dropped again to 8.9% in October as the market paused for breath.

“This is all going to feed into ramshackle results over the next few months, as prices are compared to a year earlier. It means the annual comparison is likely to rise again next month, before dropping in September.

“For a clearer picture it’s worth checking month-on-month figures. These show that prices were up an average of £3,000 between May and June. This is roughly the kind of rise we’d seen for the previous three months, and was more than house price growth at the very start of the year. There hasn’t been a huge change in house price growth in the first half of 2022.

“This won’t last forever. Right now, price rises are being driven by an imbalance of supply and demand, and a shortage of property for sale. However, with buyer numbers slowly falling and seller numbers rising, this will shift.

“Buyers are also starting to lose confidence, which is key. The latest RICS survey heard from agents who said that buyers were more likely to pull out of sales, because of rising prices, increasing rates and more job insecurity. The tipping point is likely to come with recession.

“The Bank of England has forecast this for the end of the year, but with GDP already down over the second quarter, there’s a chance that we may already be facing one.

“Energy prices are already absorbing so much of our money that we’re cutting back significantly elsewhere, which is taking a toll on businesses. At some point this is likely to affect jobs, which have been instrumental in propping up demand for property. Once job insecurity feeds into the market it may finally do what runaway house prices, rampant inflation and rising rates didn’t – and halt the relentless rise of house prices.”

Other statistics from the release:

Detached house prices were up 9.5%, and semi-detached were up 9.1%, while flats were up 4.9%.
New build prices were up 16.9%.
House prices in London were still the highest in the UK, at a record £538,000.
Prices in the East of England saw the highest annual growth at 9.7%, while the North East saw the lowest annual growth of 3.6%.
Prices in the North East remain the lowest in the country, at £158,000.

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay