House prices are still rising, and the latest data from Rightmove paints a bleak picture for first-time buyers. That’s because the property website suggests that the average asking price of a home is now £348,804. This is £7,785 higher than a month ago.
But, while property prices reach new highs, new data from HMRC reveals another, perhaps surprising, statistic. Here’s what you need to know.
What’s happening with house prices?
House prices have rocketed so far in 2022, and we’re less than two months into the new year!
Rightmove suggests asking prices are rising at the fastest rate ever seen. On a similar note, Nationwide’s latest House Price Index reports house prices rose 11.2% in January alone. This is up from 10.4% in December 2021.
Meanwhile, since the beginning of the pandemic, average house prices have risen roughly £25,000. This statistic won’t be welcomed by first-time buyers, of course.
For those worried about high house prices, the government hasn’t really indicated whether or not it supports soaring prices. While there are a number of schemes to ‘help’ first-time buyers, such as Help to Buy, such initiatives only really increase demand. They do little to address underlying causes of soaring prices, such as restrictive planning laws and access to cheap mortgages.
It’s worth noting that some critics believe the government is actually in favour of rising house prices due to the fact that homeowners are statistically more likely to vote than renters.
What’s the surprising property market statistic?
You may be under the impression that soaring house prices are the result of a ‘booming market’, where buyers and sellers are equally keen to trade and new properties are frequently entering the market.
Yet, new data has revealed that this is not the case at all. That’s because, according to HMRC, 106,990 property transactions took place in January. This is a whopping 10.6% lower than the same period last year.
This suggests a big reason behind soaring house prices is the lack of homes on the market. While a home shortage is no secret, this huge drop in the number of properties changing hands is somewhat surprising. It may also indicate that current homeowners are reluctant to move.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, coldly explains how a drop in the number of transactions from the tail end of last year is now being shown through this new data. She explains: “The January chill hit the property market, rapidly cooling buyer enthusiasm, and freezing sales.
“It takes 16 weeks from listing a property to completing a sale at the moment, so the drop in sales reflected a glacial October, facing the chilling impact of interest rate speculation and the Stamp Duty holiday finally dwindling away to nothing.”
What will happen to house prices in 2022?
Predicting house prices is near impossible due to the sheer number of variables influencing the market.
However, it’s worth knowing that interest rate rises can have a massive impact on mortgage rates, which can actually lower house prices. This is because access to cheap credit is one of the biggest causes of high house prices.
However, as Sarah Coles indicates above, cheap mortgage rates haven’t yet disappeared from the market, despite the Bank of England upping its base rate last month. However, further base rate rises are expected. If the base rate creeps up to around 1% this year, house price growth may begin to slow as a result.
Are you looking for a mortgage? With rising interest rates on the horizon, cheap mortgage deals may soon start to disappear. So, if you’re on your lender’s standard variable rate, or your fixed term is ending, it could be time to look at The Motley Fool’s list of top-rated mortgage deals.
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About the author
Karl is a writer specialising in investing and personal finance content. He regularly contributes articles on savings, bank accounts, mortgages, and loans. He was previously a Personal Finance Writer for MoneySavingExpert.
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