Annual house price growth hits 12.6% in October: UK HPI

Posted on Thursday, December 15, 2022

Average house prices across the UK increased by 12.6% over the year to October, rising from 9.9% in September, according to the latest data released from the ONS and Land Registry. 

The sharp rise recorded in the annual percentage change was due to data comparisons against October 2021 when house prices fell because of the end of the pandemic SDLT holiday.

Rising prices throughout 2022 saw average house prices reaching a record high - hitting £296,000 in October 2022, £33,000 higher than this time last year.

A regional breakdown reveals that average house prices increased over the year by 13.2% in England, 11.8% in Wales, 8.5% in Scotland, and 10.7% in Northern Ireland.

The North East continued to have the lowest average house price of all English regions, at £168,000 in October 2022, which is a record high for the region.

The North East has changed from being the region with the lowest annual house price inflation in September 2022 to the region with the highest house price inflation in October 2022. Average prices in the North East increased by 17.3% in the year to October 2022, up from an annual percentage change of 6.7% in September 2022.

Average house prices in the North East increased by 1.9% between September and October 2022; the largest rise in average house prices of all regions. In contrast, average house prices in the North East decreased sharply by 7.3% in the same period last year.

London was the region with the lowest annual house price inflation, with average prices increasing by 6.7% in the year to October 2022. This was down from an annual percentage change of 7.4% in September 2022. London’s annual percentage change was slowed by average London house prices falling by 0.9% between September and October 2022. London was the only region in the UK where average house prices decreased this month.

Tom Bill, head of UK residential research at Knight Frank said: “Despite today’s figures, double-digit UK house price growth is now a thing of the past. Even as the reverberations of the mini-Budget fade, a more adverse lending landscape is emerging after 13 years of ultra-low rates. When the spring market gets underway next March, mortgage rates will be more than two percentage points higher than at the same point in 2022.

"This will keep transaction volumes in check and means price declines will become more prevalent. Knight Frank expects UK prices to fall by 10% over the next two years, taking them back to where they were in summer 2021. We think London prices will continue to underperform the rest of the country, with the exception of prime central areas, which will benefit from a higher proportion of cash buyers.”

Karen Noye mortgage expert at Quilter, comments: "The government’s house price index paints a somewhat more rosy picture of the housing market than the likes of Halifax or Nationwide. Today’s figures show that UK house prices have continued to rise, with the annual percentage change reaching 12.6% in the year to October 2022. This is up from 9.9% in the year to September 2022. However, the increase in annual house price percentage should be taken with a pinch of salt as the rise can be attributed to a decrease in average UK house prices between September and October 2021, due to changes to Stamp Duty Land Tax, which artificially pumped prices up last year.

"It's worth noting that house price growth is starting to slow down, with new buyer enquiries declining for the sixth consecutive month. Additionally, mortgage approvals for house purchases have decreased, indicating that prospective homebuyers may be becoming more cautious. Just yesterday, we saw the Bank of England warn that mortgages are going to get considerably more expensive next year for millions. This will take some of the froth out of the market as many people will choose to batten down the hatches and others will be forced into putting their homes on the market in a bid to downsize, unlock cash and achieve lower monthly bills.

"The housing market in the short to medium term is likely to suffer somewhat however with so little stock around it won’t take long for prices to start to rise again after a projected dip in the new year."

Vikki Jefferies, Proposition Director at PRIMIS Mortgage Network, comments: "Today’s figures demonstrate the resilience of the housing market, with the average UK house price increasing by 12.6% over the year to October 2022, up from 9.9% in September 2022. It is positive to see that, with many mortgage lenders now reinstating products, we have seen the average five-year fixed-rate product dropping below 6% in December for the first time in two months.

“With the cost of living likely to remain high as we head into 2023, affordability remains a key priority for many consumers. As a result, the role of expert financial advice will continue to be vital. Brokers need to work with their clients to help them find the most suitable product for their individual circumstances.”

Gareth Lewis, commercial director of property lender MT Finance, says: "While these figures are based upon transaction flow that started its journey in the summer, the signs are there that we are seeing values soften along with sales volumes.

"As we know, these figures will be further impacted in the coming months due to the removal of mortgage products, and their replacement at considerably higher rates.

"There are difficult questions to be answered: homemovers need to carefully consider their options and decide whether it’s the right time to take on higher debt at a greater cost. Meanwhile, buy-to-let investors are being squeezed by the increased interest coverage ratio (ICR) test, limiting the amount they can borrow, so they will also need to decide whether they are able to put more money into a purchase.

"However, while there is still a lack of supply, the negative impact on values will be slow."

Via @PropertyReporter