UK house prices increase by 10% despite rising cost of living


UK house prices rose by 10% in the year to August, according to the Nationwide.

The BBC reported that: “The market still has greater demand from buyers than homes for sale, leading to a double-digit annual rise for the 10th consecutive month.

The mortgage lender said the typical property price had risen by £50,000 in the past two years to £273,751.”

Earlier this year, Advantage wrote about how a shortage of housing stock was driving up prices. We’ve also looked at the impact of the even more acute shortage of rental properties on the market.

The shortage of rental properties creates added pressure to buy

Myron Jobson, senior personal finance analyst at Interactive Investor, was quoted by the BBC, saying: “Fast-rising rents are not offering any relief and could keep some buyers in the hunt for a home for longer than they would like,”

“Even though the housing market is slowing, it is nowhere near a crash. Strong demand for homes far outstripping available housing inventory means the housing market remains a difficult one for wannabe homeowners and those looking to climb up the property ladder.”

Prices could soften over the coming months

“There are signs that the housing market is losing some momentum,” said Robert Gardner, Nationwide’s chief economist.

“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year.

“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”

Zoopla sounded a cautiously optimistic note regarding the likely impact of rising interest rates, stating: “Currently, a high proportion of mortgagees are on fixed rate loans, meaning the impact of rising rates won’t be felt by the majority.

“And mortgage affordability testing, where to get a mortgage you need to prove you can afford a 6.5% to 7% mortgage rate – despite paying 2% – has baked in a certain level of resilience that will limit the downside for prices and volumes in our view.”


Advantage’s view: While some property experts are more optimistic than others over how the UK housing market is likely to perform over the coming months, there does appear to be a consensus that we’ll see a softening of house prices. Even before accounting for the current economic climate, this is something we’ve been anticipating, following the record-breaking rate of house price growth that we’ve seen post-pandemic.


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