Rosy August house price figures were the calm before the storm: ONS

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on ONS House Price Index and Land Registry House Price Index, showing the rosy August house price figures were the calm before the storm.

Key points from publications:
    • Average house prices were up 13.6% in the year to August – down from 16% in the year to July, but still the second fastest annual growth figure since the financial crisis.
    • The average house price hit a record £296,000 – £36,000 higher than a year earlier.
    • Average prices rose 0.9% between July and August – the lowest monthly rise since March.
Sarah Coles says:

“House prices in August enjoyed another month in the sun, with the second highest annual growth figures since the onset of the financial crisis. Unfortunately for today’s buyers and sellers, in the months since, winter has well and truly set in.

“August’s figures reflect demand back in May, when we could see a few warning signs start to emerge, but not the giant flashing red lights bedecking the market right now. Although demand had started to fall, there was still a lot in the market’s favour – including relatively high demand, a real shortage of supply, and average fixed rate mortgages at just over 2%.

“The picture gradually worsened from there, and then chaos kicked off in September. Mortgage rates soared overnight and have been climbing ever since. According to Moneyfacts, the average two-year fixed rate is approaching 6.5%. Meanwhile, figures from Rightmove show buyer numbers fell by 15% in the two-weeks after the mini budget.

“This will take a while to feed through into house price figures. We’re likely to see growth slow in the coming months, and then the real strife will emerge as we get to the end of the year and the start of 2023. At that point, there’s the risk that slowing growth gradually evolves into price falls.

“For prospective buyers who are yet to get a mortgage, this creates a new dilemma – of whether to press on and stretch your finances or hold back in the hope of price drops. The right answer will depend entirely on your circumstances. If you can afford the property you need, you plan to stay there for the foreseeable future, and life is either difficult or expensive where you are now, it may still make sense to buy today.

“However, if you’re worried about overstretching yourself and you either have an affordable rent or are living with parents so aren’t worried about costs in the interim, you may choose to hang fire. If you take this approach, bear in mind that falls aren’t guaranteed – even if average prices drop, they may not do so in the area where you want to buy.

“If they do fall, they may well rise first, so you could wait a while for prices to end up where they are now.

“And even if they end up cheaper than today, you won’t know when house prices have reached the bottom until it’s too late. So don’t hold off until you think it’s the perfect moment: if you’re going to wait, only do so until it’s right for you.”

 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay