House Prices Hit Record, but a Slowdown Is on the Way

House prices have leapt 13 per cent in a year (May 2021), but these golden times for homeowners and property investors are drawing to a close. 

Experts across the board agree that the market is applying brakes to runaway house price growth, and although values will keep rising, the growth rate will slow. 

The latest Land Registry statistics for the year-ending May show prices rose 12.8 per cent year-on-year. April was another excellent month for prices, which were up 11.9 per cent in 12 months, but market analysts say homeowners are unlikely to see such significant rises soon. 

The Land Registry data also found the average price of a UK home had increased by £32,000 in the year to £283,000. May was the seventh month to see rising house prices, while the 12.9 per cent increase was the highest since June 2021.

UK house price growth since 2006

UK house price growth since 2006.png

Source: Land Registry

House prices by region

The South-West was the region with the highest house price growth in the year to May, with homes going up in value by 16.9 per cent, followed by the East Midlands, where prices increased by 15.2 per cent. With an 8.2 per cent increase, London house prices went up least, with the North East also lagging the rest with a 9.2 per cent rise. 

In Wales, average home prices were up 14.4 per cent to a record £212,000, which was a nudge downward on April's 15.4 per cent increase. 

In Scotland, house prices increased 11.2 per cent in the 12 months to May but slowed from the 14.7 per cent growth posted in April. At the same time, the latest average house price was £188,000. 

Looking at England rather than the UK, average house prices hit a record £302,000. However, the highest house prices are in London, where the average cost of a home is £526,000. The lowest are in the North East, where an average home is priced at £154,000.

How house prices changed in England

How house prices changed in England.png

Source: Land Registry

Sellers demand record prices

Online property portal Rightmove confirms house asking prices have hit record levels for the sixth month, but buyer demand is dropping as interest rates rise. Rightmove says the average asking price is £369,968 - up £1,354 in a month. 

The Bank of England kept interest rates steady this month, leaving them at 1.25 per cent, which they rose to in June. Plenty of buy-to-let mortgages are available, but lenders are raising rates, and higher rates are expected as the cost of living races ahead. 

Another issue Rightmove highlights is a lack of properties coming on the market. "In the current fast-changing economic climate, those looking to buy who find a suitable home they can afford may choose to act now rather than wait. 

While more choice is welcome news, the number of homes available remains well below the more normal levels of 2019 and cannot satisfy the continued high demand that we're seeing," said Tim Bannister, Rightmove's Director of Property Science.

Housing market cools

One of Britain's largest mortgage lenders says house price growth is slowing. 

The Nationwide quotes 'modest growth' as prices slowed from 11.2 per cent in May to 10.7 per cent in June. The building society confirmed a lack of homes for sale was buoying the market. 

However, in June, rival The Halifax found prices saw the most significant monthly rise in 15 years and the most considerable yearly upswing since late 2004. The annual increase was 13 per cent, while prices ratcheted up 1.8 per cent between May and June. 

Estate agents also flagged a slowing market. 

The Royal Institution of Chartered Surveyors (RICS) found demand and sales cooling in June. "With new instructions remaining generally flat over recent months, tight supply conditions still underpin house prices. Indeed, for the time being, respondents continue to cite an increase in house prices across all parts of The UK, even if the pace of growth looks to be easing to a certain degree," said the latest housing market monthly survey from RICS.

House price history for your neighbourhood

Use this interactive map to assess how your property investments have performed. Input the town name, and the map does the rest.  

Source: ONS and Land Registry

House price digest FAQ

The figures for average house prices and movements in property values can be confusing if you don't know how to read the data. Here are some of the most asked questions about house price indices.

Why are the average property prices different in each report?

The reports use different data to draw conclusions and take the data from different periods. Nationwide and Halifax base their indices on customer data, which are much smaller samples than the national data analysed by the ONS. Acadata's methodology includes analysis that no other index uses. Each organisation collects data over different periods, making a direct comparison difficult.

What is the average house price?

There's no such thing as an average home. The figure is calculated from the total value of all transactions in the sample divided by the number of homes changing hands.

What are the asking and sale prices?

The asking price is the amount an owner wants to achieve from a house sale, while the sale price is the negotiated amount the buyer pays.

Which house price index is the best?

All have flaws because of the restricted data, but the one with the broadest sample comes from the ONS. Unfortunately, the ONS data is usually the last to market and out of date by two to three months on publication.

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