What has happened to housing prices?
There are several reliable sources of data on house prices, including monthly indices that show changes in house prices over the previous month and the previous year.
The UK House Price Index is the most accurate of the house price indices because it is based on completed sales, both cash and mortgage sales. The extensive data comes from the HM Land Registry and other government agencies. However, while it provides a clear picture of what is happening in the housing market, the data is published with a lag. The most recent available data is for June.
It revealed that the average house price in the UK had risen by 1.0%, following a 1.2% increase the previous month, with a 7.8 percent year-on-year increase.
What is causing the price change in the property market?
Over the last two years, the housing market has been volatile, with the pandemic having a direct impact on house prices. There was an initial slump as the country went into lockdown for the first time in March 2020, followed by a massive resurgence beginning in June 2020, when society began to open again. The introduction of a stamp duty holiday on 8 July 2020, which offered buyers a tax saving of up to £15,000 when purchasing a house, was a key driver. This acted as a stimulant, driving house prices up by an average of £15,409 between June and November 2020, according to Halifax data, effectively cancelling out the stamp duty savings.
The main stamp duty holiday ended at the end of June 2021, with a tapering until the end of September, when first-time buyers could save up to £2,500. House prices rose in the run-up to the deadlines for the completion of each of these phases, resulting in double-digit annual growth through 2021. This was aided by historically low mortgage rates and the reintroduction of higher loan-to-value mortgages.
It’s not certain what will happen to house prices next, with most analysts predicting a return to more normal levels. Another increase in the Bank of England's base rate in August 2022 will make borrowing more expensive, taking some of the sting out of the market, while the pressure of rising living costs will also dampen it further.