The average asking price for UK houses has hit yet another record high in June 2022, but there are also signs that the pace of house price growth has started to slow.
Property experts Rightmove found that the current average UK house price is £368,614 as of June 2022. This represents a 0.3% rise from the previous month, which is equivalent to £1,113. However, this is also the smallest increase in average house prices since January.
With record levels of inflation, rising interest rates, and the cost of living crisis squeezing households up and down the country, it would seem that the spike in house prices brought about by the Covid-19 pandemic is finally starting to ease.
We are going to explore the current average house prices across the UK and find out why they have been rising so rapidly and why they are now starting to slow.
How much are current average house prices?
In June 2022, the average asking price for properties across the UK is £368,614, which represents a 0.3% rise from May. Scotland saw the biggest rise in average asking prices for houses across the month at 2.4%, while London saw the lowest with an overall decrease of -1.1% in the same period, which represents a significant monthly price fall for the capital.
Although house prices have risen consistently since the 1990s (excluding the period during and immediately after the financial crisis of 2008/09), the rate of property price inflation has been at record levels over the course of the Covid-19 pandemic. However, that now seems to be slowing, which is a welcome relief for many people who are looking to get a foot on the property ladder.
So let’s jump in and take a look at how this month’s figures compare with previous months.
How do June’s figures compare with previous months?
The 0.3% rise in asking prices for houses in June is down from May, which saw a 2.1% rise. It is also down from April and March which saw rises of 1.6% and 1.7% respectively.
June’s rise is the lowest since January 2022, which also saw a 0.3% rise.
Although the rate of price growth has slowed somewhat, the current average asking price of £368,614 is still the highest on record for the UK.
The house price figures from June show that house prices have risen by over £55,000 since pre-pandemic. In March 2020, the same figure was at £312,625.
Monthly changes in UK house prices
|Month||Avg. asking price||Monthly change||Annual change|
|June 2022||£368,614||+ 0.3%||+ 9.7%|
|April 2022||£367,501||+ 2.1%||+ 10.2%|
What are the average house prices across the country?
Scotland saw the highest rise in average asking prices for houses. The June average of £186,738 represents a 2.4% rise from May.
With a growth rate of -1.1%, London saw the lowest average house price increase in the country. However, the capital still has by far the highest average prices overall in the country at £681,992.
Wales also experienced a relatively high rise in house prices, with a monthly rise of 2.2% between May and June. This means that the average property in Wales is valued at £2663,447.
Like London, the North East also saw a fall in house prices, of -0.8%. This means that the region still has the lowest average house prices in the UK at £178,650.
|Region||Avg. asking price||Monthly change||Annual change|
|Yorkshire and Humber||£241,284||1%||10.6%|
Why have house prices risen so much over the pandemic?
Barring a significant plummet during the 2008/09 financial crash, UK house prices have grown rapidly and consistently since the 1990s. However, the period between 2020 and 2022 – during the Covid-19 pandemic – saw record house price growth rates for the country.
This was in part because UK Chancellor, Rishi Sunak, introduced a temporary Stamp Duty holiday in an effort to ensure that the housing market was kept active while the country was in lockdown. The Stamp Duty holiday ended in October 2021.
What was the Stamp Duty holiday?
Stamp Duty is a tax that you pay when you buy property over a certain price. Prior to and after the Stamp Duty holiday, the threshold was £125,000 for residential properties. During the Stamp Duty holiday, the threshold was raised to £500,000.
The Stamp Duty holiday led to high demand for property, especially amongst first-time buyers – people moving from rented property to property they owned. However, the demand was not met by an equivalent rise on the supply side as people who already owned property were unlikely to benefit from the holiday and were also unlikely to be keen to move during a global pandemic.
This imbalance led to rapid inflation in the property market, which persisted beyond the lockdowns and the Stamp Duty holiday, though it now looks to be slowing.
Why else has the average house price rise slowed?
When it comes to the property market, there are always multiple factors involved in the prevailing trends. As we have just seen, it is likely that the backlog of increased demand due to the Stamp Duty holiday has finally eased and the average prices reflect this.
However, another one of the key factors in the slowing of house price growth is the effect of the cost of living crisis. Energy prices have reached record highs with gas, electricity, and petrol all costing up to double what they did last year.
This is in part due to the ongoing reverberations of Covid, but it is also due to Russia being cut off from the rest of the world as they pursue the war in Ukraine. Russia is one of the main gas suppliers to the rest of the world and much of our energy depends on healthy trading relations with them.
Combined with this is an astonishing rise in inflation rates, which recently hit 9.1% – the highest since 1982.
All of this comes together to create a market that has little confidence and little money, meaning that people are far less likely to want to buy property.
With less demand for property, the supply side is also less squeezed. So, as demand decreases, so too does the growth rate of property prices.
How do interest rates affect the property market?
Interest is the amount of money that borrowers have to pay back to a bank in addition to the amount of money they loaned. If there were 1% interest rates and you borrowed £100, you would have to pay back £101 to the bank you borrowed from.
Interest rates in the UK are set by the Bank of England. This sets the bar for what other banks charge in interest as much of the money used by banks is actually borrowed from the Bank of England.
If interest rates are low, people are encouraged to borrow as they won’t have to pay back so much money. Low-interest rates generally lead to more mortgages as people want to capitalise on investing in property and not have to pay back far more than they borrowed.
Since the financial crisis, UK interest rates have been at historic lows and have frequently hovered around the 0.1% mark. To put that into perspective, prior to the crash interest rates were at 6%.
In an effort to stem the demand for property, the Bank of England has gradually raised interest rates since December 2021. First, they were raised to 0.25%, then 0.5% and they have steadily risen up to where they are now, 1.25%.
This rise has deterred people from taking out mortgages. Although interest rates are still fairly low, their rise along with the cost of living crisis has led to a decrease in the demand for property and a subsequent fall in average house prices.
However, raising interest rates is not the only solution to reducing the supply/demand imbalance that has led to rapid house price inflation. Many people argue that the best way to combat the issue is for the government to invest in building more affordable homes to create long-term solutions in the housing market.
The UK average house price has risen at almost unprecedented rates since the onset of the Covid-19 pandemic. While annual house price growth is normal and is indicative of a healthy, functioning economy, annual growth rates of over 10% have led to an inflated housing market.
As the average price of property has risen, the financial squeeze of the cost of living crisis has begun to take its toll. This, coupled with a rise in interest rates, has led to a decrease in demand for property.
As demand for property slows, so too does house price growth. This is reflected in the figures for June’s average asking price for houses in the UK. At 0.3%, the UK house price growth rate is at its slowest since the start of the year.