Signs of slowdown? Wales overtaken as part of UK with fastest growing house prices at ‘only’ 13.4%

Wales has finally been overtaken as the part of the UK with the fastest-growing house prices – with annual growth slowing to ‘only’ 13.4%.

Average house prices were up to £208,309 in June. Wales was squeezed into third place by the South West of England and East Anglia.

It still meant that house prices hit an all-time record, although there are “tentative signs of a slowdown” across the nations of the UK, according to the Nationwide Building Society said.

Across the UK, the average house price in June was £271,613, up by 10.7% across the UK in June, but slowing from 11.2% in May,

Looking across the UK, Robert Gardner, Nationwide’s chief economist, said quarterly figures showed a softening of house price growth in many nations and regions in the three months to June.

“The South West (of England) overtook Wales as the strongest-performing region in quarter two, with house prices up 14.7% year on year, a slight increase from the previous quarter,” he said.

“This was closely followed by East Anglia, where annual price growth remained at 14.2%.

“Wales saw a slowing in annual price growth to 13.4%, from 15.3% in the first quarter.

“Price growth in Northern Ireland was similar to last quarter at 11.0%. Meanwhile, Scotland saw a 9.5% year-on-year rise in house prices.

“There was a slowing in annual house price growth in England to 10.7%, from 11.6% in the previous quarter.

“While the South West was the strongest performing region, overall southern England saw weaker growth than northern England.

“Within northern England, the North West was the strongest-performing region, with price growth picking up to 13.3% year on year, from 12.4% in the first quarter.

“London remained the weakest-performing UK region, with annual price growth slowing to 6.0%, from 7.4% in the previous quarter.”

House Prices

Here are average house prices in the second quarter of 2022 followed by the annual increase in prices, according to Nationwide Building Society:

– South West, £318,325, 14.7%

– East Anglia, £289,024, 14.2%

– Wales, £208,309, 13.4%

– North West, £213,888, 13.3%

– West Midlands, £244,167, 11.8%

– Yorkshire and the Humber, £205,714, 11.8%

– East Midlands, £234,828, 11.4%

– Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £348,564, 11.1%

– Northern Ireland, £181,550, 11.0%

– North East, £159,283, 10.6%

– Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £433,558, 10.0%

– Scotland, £181,422, 9.5%

– London, £540,399, 6.0%

‘Slow further’

Robert Gardner added that, at the same time, the stock of homes on the market has remained low, keeping an upward pressure on house prices.

“The market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year,” he said.

“Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.”

He added: “The price of a typical UK home climbed to a new record high of £271,613, with average prices increasing by over £26,000 in the past year.

“There are tentative signs of a slowdown, with the number of mortgages approved for house purchases falling back towards pre-pandemic levels in April and surveyors reporting some softening in new buyer inquiries.

“Nevertheless, the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low.

“Part of the resilience is likely to reflect the current strength of the labour market, where the number of job vacancies has exceeded the number of unemployed people in recent months.”

Will house prices drop?

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “The question is whether we will see prices slow to a crawl, stagnate, or start to drop if we see a recession.

“An awful lot depends on things we don’t yet know – including how high interest rates will go, how deep any recession might be, the impact it could have on jobs, and whether this is serious enough to cause real damage to the property market.”

She added: “The desperate dash for property at a time of rocketing prices may be over.

“Buyers have time to consider whether this is a move they can really afford, and whether they’ll still be happy they made it if prices pull back later in the year.”

Myron Jobson, senior personal finance analyst, interactive investor, said: “Property prices have gone up faster than wages, creating an affordability squeeze, while mortgage rates have risen to levels we haven’t seen in a while.

“These factors, as well as the prospect of higher interest rates to rein in runaway inflation, are likely to go some way towards taming frothy housing prices.”

Nicky Stevenson, managing director of agent group Fine & Country, said: “Increased borrowing costs have come at a time when disposable incomes are already shrinking and the UK is edging closer to recession.

“These pressures are bound to stretch affordability in the months ahead with inflation still to peak and more aggressive monetary tightening now being signalled by the Bank of England.”

Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: “We expect house prices to drop by around 2% in the second half of the year, pushing down the year-over-year rate to around 2% by the end of the year.”

Tomer Aboody, director of property lender MT Finance, said: “There is still evidence of confidence in the market due to the desire to buy and take advantage of mortgage rates before they increase further.”

Jason Tebb, chief executive of property search website OnTheMarket.com, said: “A subtle rebalancing continues as more stock comes to market.

“This is partly down to the seasonal effects of summer, traditionally a time when you would expect increased stock to become available.”