In recent months, soaring inflation and a spate of base rate hikes fuelled speculation that the property market across the UK would cool. Many expected to see prices drop due to the series of rate hikes that have seen the base rate rise to 2.25% from 0.1% in December last year. However, data shows that house sellers are continuing to raise prices despite the rate increases and the cost-of-living crisis.
Figures show that the average price of properties that came onto the market in September increased by 0.7% compared to the previous month. The online property platform, Rightmove, said the average price had grown to £367,760.
Rightmove data also shows that house prices in London have increased by 2.1% in the last month, the most significant monthly rise in any region across the country. This equates to an annual increase of 6.9%, taking the average London property price to £682,449.
As a result of soaring interest rates, buyers will now find it more challenging to get a mortgage and be faced with far higher repayments. In addition, they will have much higher bills and living costs to deal with. Nevertheless, sellers have continued to hike their asking prices, with price growth concentrated in the middle and higher sections of the property market.
Property market showing resilience
According to Tim Bannister, a housing expert at Rightmove, the property market in the UK is still very resilient despite the financial pressure facing the nation. It was further pointed out there could be another boost for property prices resulting from the stamp duty changes announced last week by the chancellor, Kwasi Kwarteng.
The new stamp duty rules mean the tax has been scrapped on all properties up to £250,000. For first-time buyers, this rises to £425,000. The changes could mean demand for properties increases due to more first-time buyers entering the market and buyers in other categories looking to move or invest. Bannister said this would likely lead to ‘unseasonal price rises’ over the coming months.
In addition, Richard Davies, MD of estate agent Chestertons, said: “If this added demand isn’t met swiftly, the tax cut could boost the existing imbalance of supply and demand, which consequently leads to an initial spike in property prices.”
While there may be an increase in the number of people entering the property market because of the stamp duty changes, ongoing interest rate increases will hit mortgage affordability due to the increased cost of repayments.