The latest ONS HPI figures have been published this morning and show:
- On a seasonally adjusted basis, average house prices in the UK increased by 0.5% between May and June 2022, following an increase of 0.8% in the previous month.
- UK average house prices increased by 7.8% over the year to June 2022, down from 12.8% in May 2022.
Inflation has also been published this morning and has hit 10.1%.
“While the ONS HPI results show another month of house price growth, we can see that this growth has slowed significantly, and, if we look at other HPIs, we should expect negative growth to be reflected in future iterations of the ONS data. We are seeing the end of an era of consistent rapid house price growth and the start of a new chapter for the housing market characterised by economic instability. The data foreshadows what is likely to be a period where house price growth stalls or goes into decline as we are finally seeing rampant inflation and reactionary interest rate rises take the heat out of demand, which has been exponentially outstripping supply since the pandemic.
“It is incredibly difficult to predict where the market will go from here. The Bank of England is cautioning of a prolonged recession and, as we currently have a lame-duck government, we don’t know whether future policy interventions to ease soaring living costs might impact market dynamics. How deep a recession is, how bad inflation gets and how high interest rates go, will all determine what happens with pricing over coming months. Despite this economic uncertainty, it is unlikely prices will fall over a sharp cliff edge. Fundamental structural issues mean we have chronically low housing stock and even if demand falls away significantly this lack of supply will act to support prices. At the same time, while cost of living is now impacting demand, there are still powerful post pandemic lifestyle factors at play that are seeing buyers come to the market as they look to reset based on new patterns of living and working.
“As competing pressures force the market in different directions, it is likely that the push and pull effect of these dynamics will ensure market activity continues at a reasonable level for the foreseeable future despite economic headwinds. We may actually see an uptick in transaction volumes if homeowners decide now is the time to sell before prices drop further. All of this means conveyancing caseloads are likely to remain full albeit not at peak levels. We also anticipate that they will get increasingly complex as sellers and buyers try to transact in constantly changing economic conditions. Law firms must continue to adopt a technology-first approach to drive efficiencies to manage what is likely to be a difficult next twelve months characterised by large, complex caseloads. The case for driving efficiency through digitisation is even more clear in uncertain economic times as the industry faces down a possible recession. The improvements technology can bring by replacing law firm legacy processes could well be essential to keeping the housing market going if we see prolonged recession leading to a period of market decline.”