The latest Zoopla and Halifax House Price Index reports reveal the top spots for house price growth across the UK, and what landlords can expect from the housing market as we move into the second half of this year. With data on the most popular property type, and an update on the supply vs. demand disparity, the report is an essential read for landlords hoping to maximise their investments.
House prices have increased for the 12th consecutive month, this time by 1.8% through June, according to the Halifax House Price Index. Not only is this the biggest monthly rise since 2007, but this increase takes the annual house price growth rate to 13%, its highest since late 2004. With a 3.8% increase since last quarter, we’re now seeing a typical property cost of £294,845, a rather significant increase from the average of £265,312 reported in our most recent house price index review. Investors can expect to see growth in house prices continue throughout the year, but as recent market activity has shown, experts predict the pace of this growth to slow.
Latest Market Activity
Looking more closely at the latest market activity, we continue to see similar trends regarding supply and demand levels. According to the latest Zoopla House Price Index, in the four weeks to the 26th of June, there’s been a 40% increase in demand for homes compared to the five-year average, and just a 4% increase in the flow of new supply. Additionally, there’s been a 14% increase in the number of sales agreed, showing a positive uptick in market activity; however, a 33% decrease in the stock of homes on sale.
In terms of the types of properties that are being sought after, there has been a real shift towards larger properties. This is most evident in the difference in price growth between houses and flats. Average prices of detached houses increased at almost twice the rate of flats in the past year, at 13.9% compared to just 7.6%.
Focusing more specifically on transactions, the HMRC monthly property transactions data revealed that home sales increased in May this year. Just for May 2022, the number of UK residential transactions (seasonally adjusted) came to 109,210, an increase of 1.3% on April. Similarly, according to the Bank of England, the number of mortgages approved for property purchases grew 0.1% to over 66,000 in May. It’s important to note that this figure is 23.4% below May last year. This drop-off is likely due to exceptionally high purchase volumes at the start of 2021, around the Stamp Duty holiday deadline.
Regional Market Update
Zoopla’s regional data revealed that Nottingham seized the top spot as the city with the highest annual percentage change in house prices, with a 10.4% increase. Bournemouth and Manchester followed just behind, with 10.2% and 9.6%, respectively. Looking more broadly at the country, the Northwest was the region with the highest change, at 9.9%, followed by the Southeast at 8.4%, and the Northeast at 7.5%.
The United Kingdom saw an annual increase in house prices of 8.4%, but Wales exceeded this, rising 11.4%. Scotland’s growth was slightly lower than the UK average, at 6.1%. Interestingly, this increase now takes the average Scottish home cost to £201,549, which is the first time this statistic has ever been over £200,000.
Unsurprisingly, London remains behind other regions, with an annual percentage change in house prices of just 3.9%. However, with an average property price of £547,031, the capital holds its spot as the most expensive location in the UK to purchase a home.
What should property investors expect from house prices?
As mentioned above, the disparity between demand for houses and the amount of stock available has significantly influenced the market. Halifax Managing Director, Russell Galley, commented that the “supply-demand imbalance continues to be the reason house prices are rising so sharply”. However, the industry outlook seems to expect this gap to start to shrink. According to the Zoopla House Price Index, the level of demand for properties is beginning to return to more normal levels, despite being 30% higher than the five-year average. The prediction is that as this pressure from demand eases, so shall the rate of price increases. This data reflects Halifax’s predictions, wherein house price growth will slow this year, just perhaps later than initially expected.
Another reason experts expect house price growth to slow is due to the increase in time taken for properties to sell. Currently, the average time from listing to sale agreed is 22 days, an increase from 20 in March. The region with the quickest process to sell is the Southwest, at just 19 days. London houses, on the other hand, take the longest to sell, with 35 days between the listing and sale agreed. This is notably down, however, from the five-year average of 50 days.
As the Bank of England Base Rate (BBR) and SWAP rates continue to hike mortgage interest rates, we continue to encourage landlords and property investors to secure a competitive rate now to save money on the overall loan. Zoopla expect buyers to become more frugal regarding mortgage rates as they continue to climb, and as such, expect house price growth to slow through the second half of this year.
Both the Zoopla and Halifax reports reveal the same outlook: the rate of house price growth is expected to slow, but neither anticipates a decline in prices. As such, the market is highly unlikely to ‘crash’, but more probable, is a slow return to a steady pace. Industry experts predict that the annual house price growth for the year will finish at 3%, driven by activity levels indicating transactions are currently at £1.2 million across the UK. While there has been a general uncertainty around the property market, especially coming out of the pandemic, the multiple industry expert outlooks remain positive. Landlords can therefore take comfort in their worthwhile property investments as the sector gradually returns to ‘normal’, reliable levels.
15th July 2022