House prices in the UK rose 7.8 percent in the year to June, a slowdown from the 12.8 percent year-on-year recorded in May, the Office for National Statistics said on Wednesday.
However, the slower rate of increase was distorted by “the increases in the [house] prices seen in June 2021, which were the result of changes in tax breaks,” the ONS noted.
The rise comes despite a recent rise in mortgage costs, following the Bank of England’s decision to raise its benchmark interest rate from 0.1 percent in December to 1.75% this month in a bid to curb inflation.
Economists expect more interest rate hikes this year, which will further increase mortgage costs. Andrew Sentance, a senior adviser to consultancy Cambridge Econometrics, said Wednesday that the BoE’s policy rate may have to rise as much as 4 percent because policymakers had fallen “behind the curve.”
Prices have also been pushed up by a lack of housing on the market.
The average UK home cost £286,000 in June, £20,000 more compared to a year ago, according to US data.
In England, the average price rose 7.3 per cent over the year to £305,000. Prices rose 8.6 per cent to £213,000 in Wales, 11.6 per cent to £192,000 in Scotland and 9.6 per cent in Northern Ireland to £169,000.
The news of the rise in house prices came as inflation in the UK soared to 10.1 per cent in July, the first time in more than four decades that it has recorded an annual double-digit increase.
Jean Jameson, chief sales officer at estate agent Foxtons, said that while London reported the lowest annual growth rate of any UK region, the 8.2 percent increase in the capital from July 2021 was the “biggest change in annual property prices since July 2016”. .
“Property prices rose faster in the suburbs of London than in inland London, by 7.7 percent and 4.7 percent respectively,” Jameson said. “We may even see a plateau in house prices in some inner-city London boroughs in the coming months.”
Persimmon, one of the UK’s largest homebuilders, said in its interim results on Wednesday that it had sold homes for an average of £245,597 in the first half of 2022, up 4 percent from the same period last year. It added that the rise in selling prices mitigated cost inflation.
But sales for the first seven weeks of the second half of the year were down 11 percent year on year. During his earnings presentation, CEO Dean Finch said it was too early to say whether this marked a summer lull or a longer-term downtrend.
“In those areas where we have control, we’re making good progress,” Finch said, but added that the elimination of the government’s Help to Buy program and broader economic pressures brought challenges for next year.
“I think Persimmon will do well,” he said. “It will probably have an adjustment next year, but it will come out on the other side.”
There was a “big bundle of self-help” Persimmon could use to support his sales, he added, such as trading more with his customers.
Shares in Persimmon fell nearly 2.4 percent during lunchtime trading in London, ahead of the broader blue-chip UK stock index.