House Price Index - August 2022

Stamp duty changes are welcome and will boost some sectors of the market but, overall, they are unlikely to offset the impact of higher mortgage rates on housing activity.

The Housing market is transitioning to a buyers’ market as higher mortgage rates are set to cut buying power by up to 28%

The macro backdrop for the housing market has evolved rapidly over the summer. Central banks have increased interest rates to bring down inflation. Rising energy prices are adding to the cost-of-living squeeze. UK consumer confidence has hit an all-time low.

Despite this challenging backdrop, these factors have not yet had a material impact on leading indicators of sales market activity. The strong start to the year has carried the momentum into the summer.

As we enter the autumn selling season, demand for housing continues to soften and is much lower than this time last year. UK-wide demand remains 8% above the 5-year average, supported by strong buyer interest in affordable markets, such as Scotland. All other regions have demand in line with the 5-year average.

The UK government has responded with tax cuts and an energy price cap to support housing demand. Changes to stamp duty will boost some segments but the recent spike in borrowing costs are set to push mortgage rates higher.

Summary

  • The Housing market is transitioning to a buyers’ market as higher mortgage rates are set to cut buying power by up to 28%
  • The jump in house prices over the pandemic is compounding the affordability challenge, especially in southern England
  • Some regions have seen 10 years of house price growth compressed into two years
  • New sales are holding up with no sudden drop in demand in recent weeks - but buyer interest is weaker than a year ago
  • Asking price reductions are at the highest levels since before the pandemic as sellers adjust to more price-sensitive demand
  • Stamp duty changes will support regional markets and first-time buyers in southern England at a low cost to the exchequer.

View the full report.

Walton Robinson
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