Halifax HPI: market only looks rosy in the rear-view mirror

In August, house prices were up 11.5% in  year, and the average price hit a record £294,260. They were up 0.4% in a month – bouncing back from falls in July, but still below the average monthly rise of the past 12 months of 0.9%.

Annual price growth has been gradually easing, after hitting 12.5% in June. London saw its highest annual price growth in six years, at 8.8%, with average prices hitting a record £554,718.

The Halifax House Price Index for August was released today: august-2022-halifax-house-price-index.pdf

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “The property market is looking relatively rosy, but that’s largely because we’re looking in the rear view mirror.

“Prices rose by double-digits again in August, to a new record high, and monthly price rises returned to positive growth again. Wales saw annual price rises of 16.1% – which is something we haven’t seen in the region for 17 years. Even London, which has been a laggard for years, posted the highest price growth in six years. It looks like everything in the property market is rosy. But this reflects the market two or three months ago, because of the lag between sales being agreed and completions, and in the intervening months, the world has started to look a bit different.

“Back in May, when interest rates were at 1%, talk of recession was much more subdued and while we had seen the energy price cap rise in April, future rises weren’t at the forefront of people’s minds. We had seen demand start to come off the boil, but the RICS report at the time highlighted that prices were still being driven up by a shortage of properties on the market.

“Now the cost-of-living crisis has hit home, and while we may not be forced to face the full impact of rises in energy prices, we’re still having to cope with rampant inflation across the board. At a time of rising rates and higher house prices, this is going to push property out of reach for desperate buyers.

“There are a couple of useful measures of demand at the moment, including the number of mortgages being approved for purchases over the next few months. They were slightly higher in July than June, but still below the pre-pandemic average. The RICS residential market survey, meanwhile, shows demand has been falling since May. The comments from agents also offer a useful insight, because right now buyers are also increasingly wary. They’re less likely to be jumping in with both feet, and more likely to be haggling for a cheaper price or pulling out of sales.

“As we go through the rest of the year. higher interest rates and runaway inflation are only going to make life harder. However, we won’t see annual house price rises fall in a straight line. This is partly because of the echoes of the stamp duty holiday last year which created really lumpy price changes a year ago. However, it’s also because the property market is driven to a huge extent by sentiment, and right now, that’s a bit of a rollercoaster ride.”