It has been a challenging year for people across the UK. Mortgage rates rose from 0.1% in December to 2.25% today, with another rise on the horizon. Meanwhile, the level of mortgage choice has fallen as the market adjusts to the higher interest rates.
This is against a backdrop of record high inflation and energy cap rises. However, the property market appears to remain strong as Scottish average house prices went up by 9.7% to a record average of £224,035 in the year to July, according to the Walker Fraser Steele Acadata House Price Index. This makes the average house price £18,600 higher than the same period in 2021. The monthly climb from June to July this year was £1,725, or 0.8%.
This month there has been a fall in transactions, but this is typical for June and July as schools shut for the summer and people go on holiday. This year is the first time we have seen unrestricted overseas travel, which means that people have been delaying any plans of buying or selling homes until the autumn. In addition, the ‘race for space’ has eased as many people look toward returning to the office or working part-time from home to mitigate the cost of energy.
The Index reported that a third of all local authorities recorded average prices in July. Regionally, Argyll and Bute saw the highest annual growth rate at 18.1%, taking the average cost to £228,938.
The highest growth was seen in semi-detached properties, which went up in value by 10.5%; by contrast, semi-detached properties saw the second lowest growth rising by 9.1%. This represents lifestyle changes of people in the UK.
Meanwhile, according to ONS data based on Land Registry final sale prices, house prices in the UK went up at a rate not seen since 2003, a rise of 15.5% from July 2021 to July 2022. In June 2022, it was 7.7%.
The ONS data shows that average UK house prices went up by £6,000 between June and July this year compared with a fall of £13,000 between June and July in 2021. In July 2022, the average UK house price was £292,000 – this is £39,000 higher than the same month last year.
On a regional basis, average house prices increased over the year in England by 16.4%, in Wales by 17.6%, in Scotland by 9.9 and Northern Ireland by 9.6%.
We are now seeing pressure on homeowners from rising interest rates and a high cost of living. Purchases agreed upon in April would have been completed in July, and would not have known what was ahead. However, the house price growth at the same rate is unsustainable due to mortgage affordability. This could have a dampening effect on house prices.
If the Bank of England raises rates again in the coming weeks, property could be even more unaffordable. High employment levels are a crucial factor when looking at the property market, and at present, jobs are secure, which makes the property market stable.
First-time buyers struggle with rising property prices, rising rents and high living costs, making it even harder to save a deposit. Those who can’t rely on the Bank of Mum and Dad can still turn to guarantee mortgages or the First Homes Scheme. Getting advice from a mortgage broker should be the first step.
In July, there was a clear uplift in property viewings and people registering their interest with estate agents. With impending rate rises, people were perhaps looking to move sooner rather than later.
Looking at the rental sector, there has been a 12.3% rise in rent over the last year to an average of £1,051 a month, according to Zoopla, with tenants looking for smaller properties to save on running costs.
In the latest Rental Market Report, tenants are shifting their focus to two-bedroom flats from two and three-bedroom homes last year. The report says that the cost-of-living crisis significantly increasing energy bills is pushing tenants towards energy-efficient, smaller homes.
With a chronic undersupply of rental homes, there is no immediate sign that prices will change – at present, the stock of rentals is 46% below the 5-year average and 7% below the long-term average as people stay put to avoid rent increases. Landlords are increasingly selling stock to avoid tax and mortgage rises.
Rental growth is highest in urban areas such as Manchester at 15.5%, Glasgow at 14.4% and Bristol at 12.9%.