UK house prices hit record high but will these gains be short-lived?

Online real estate and property website Rightmove recently released its latest Rightmove House Price Index, which saw the average asking price for a house in Britain rise to a record high.

According to their index, the average asking price has risen by £19,082 over the past three months, reaching a record high of £360,101.

What’s more, the time taken to sell a home has dropped from an average of 67 days three years ago to 33 days now, a reduction of more than half.

53% of properties are also selling at or over their final advertised asking price, which is the highest percentage Rightmove said it had ever seen. Plus, on average, properties are also achieving 98.9% of their final advertised asking price.

Tim Bannister, Rightmove’s Director of Property Data, said the recent gains have surpassed the large rises seen last year but the momentum will not last.

He commented: “With three new monthly price records in a row, 2022 has started with price rise momentum even greater than during the stamp duty holiday-fuelled market of last year.

“While growing affordability constraints mean that this momentum is not sustainable for the longer term, the high demand from a large number of buyers chasing too few properties for sale has led to a spring price frenzy, a hat-trick of record price months, and the largest price increase for a three-month period Rightmove has ever recorded.

“The strong momentum has carried over from last year and, combined with the impetus of the spring moving season, has delivered the quickest selling market we’ve ever seen.

“The high speed of the market and competition among buyers when making an onward move will be deterring some owners from putting their homes up for sale.

“However, if you can secure both a quick sale and a quick purchase then it’s a lot less stressful than the uncertainties of a slower market when finding a buyer for your own home can drag on for months or not happen at all.”

Will rising house prices last?

Director of Henry Dannell, Geoff Garrett, cited the growing economic troubles as reasons why the long-term outlook for house prices doesn’t look so favourable.

He comments: “There’s no denying that the property market has performed impressively and with the cost of borrowing remaining favourable at present and buyer demand levels unlikely to subside, the short-term outlook remains positive.

“However, both buyers and sellers would be well advised to make hay while the sun is shining, as growing economic headwinds are likely to take their toll further down the line.

“While we don’t expect to see market activity evaporate completely, the growing cost of living will be a significant factor in the months to come and as household finances are stretched, it’s likely that prospective buyers will ease off on the sums they’re willing to offer. As a result, sellers will need to realign themselves with these changing market conditions and this will cause the rate of house price growth to cool.”

However, Director of Benham and Reeves, Marc von Grundherr, says house prices in London will continue to rise until the end of the year.

He comments: “As a nation, we’ve endured a prolonged period of economic instability due to the pandemic and yet more dark clouds are gathering due to the cost of living crisis. But despite this, the UK property market remains a powerhouse of defiance, demonstrated by the fact that every region of the nation has reached record price highs in unison.

“Although London continues to trail where this asking price performance is concerned, we’ve already seen concrete signs that the market is starting to turn in 2022, putting a sluggish pandemic performance firmly behind us.

“It will, of course, take some time before this starts to filter through and bolster home seller confidence within the capital, but when it does, it won’t be long before asking price expectations start to climb considerably. So, while it very much remains a seller’s market across the board, now is the time to buy in London as property prices are only heading one way for the remainder of the year, at the very least.”

Who are the winners and losers?

Christina Melling, CEO of Stipendium, says it is first-time buyers who are taking a bigger hit as a result of the rising house prices.

She comments: “What we’re currently seeing is a feeding frenzy from second and third rung buyers and it’s this segment of the market that is driving the unsustainable levels of house price growth seen in recent months.

“Unfortunately, it’s the nation’s first-time buyers who are paying the price and those looking to take that first step are now paying £2,000 more for the pleasure compared to just one month ago. While this may not sound significant to those with the financial foundation of an existing property to fund their onward purchase, it’s yet another brick in an already substantial financial wall that’s blocking many from realising their dreams of homeownership.”

However, Managing Director of Barrows and Forrester, James Forrester, says now is the best time for current homeowners to sell their property.

He comments: “Since early 2020, an unrelenting level of homebuyer demand has fuelled a property market boom that shows no signs of slowing some two years down the line. Such sustained market conditions are quite phenomenal and as cliche as it sounds, there really never has been a better time to sell your house.

“To say homes are selling like hotcakes would be an understatement and with multiple buyers battling it out for every last scrap of property stock, sellers are achieving above and beyond their original price expectations.”

Managing Director of HBB Solutions, Chris Hodgkinson, concurs.

He says: “The market is moving at an incredibly fast pace and this certainly favours the nation’s home sellers who are spoilt for choice when it comes to the interest shown in their property.

“Despite these favourable conditions, they are still advised to act with a level head and avoid getting swept up by this cyclone of market activity.

“The highest offer isn’t always the best option and it’s important to consider a buyer’s position within the market, not just the money they’re willing to pay. Failing to do so can see a sale collapse and unnecessary additional costs incurred.”