UK house prices continue to rise despite ‘race for space’ over

Ray Bolger says house prices set to fall '10% next year

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Over the last two years, the property market has been extremely flamboyant. In 2020, Britons left city living and escaped to rural locations thanks to many working from home and in search of more space. Houses and flats in city locations with less space and fewer surrounding green areas fell in popularity with buyers, but this trend has returned.

Why are house prices still rising?

House prices in major UK cities have risen by a huge 9.2 percent so far in 2022, as demand for houses in city locations increases following the end of the COVID-19 pandemic.

In contrast, houses in suburban areas surrounding cities only rose by 7.9 percent over the same period.

Halifax has suggested that the “race for space” outside of cities is over. Andrew Asaam, mortgages director at Halifax, said: “The pandemic transformed the UK housing market.

“Homeowners wanted bigger homes and better access to green spaces, fuelling huge demand for larger properties away from urban centres.

“This accelerated house price growth in the suburbs and more rural areas, while in cities it was much slower.

“That trend didn’t disappear completely this year, as house price growth in these areas remained strong. 

“But, as daily life started to get back to normal for many, the opportunity to live in cities became more attractive again, driving up demand.

“There’s evidence of this in locations across the country, with property price inflation in the majority of cities outstripping increases in their surrounding areas.”

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The expert added that the change in economic conditions brought on by the cost of living crisis was not putting “downward pressure” on the housing market.

Andrew noted: “The extent to which such trends will continue to shape the housing market is therefore uncertain.”

Marc von Grundherr, Director of Benham and Reeves, explained that house prices will continue to climb and this will remain the case as long as the buyer demand balance remains “tippled firmly in favour of home sellers”.

The expert added: “Mortgage rates also remain fairly favourable at present and so we simply won’t see a house price dip while this remains the case. 

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“However, the increasing cost of borrowing may curb the enthusiasm of homebuyers when it comes to their ferocity during the negotiations stage and so sellers may no longer see their property achieve above and beyond their asking price expectations, as has largely been the case during the pandemic.”

Cities with the biggest house price growth

Halifax found that it was Sheffield which has seen the greatest house price inflation this year. House prices have risen 18.9 percent, with the average home now costing £228,353.

This is just below the current UK city average of £238,114, according to Halifax. Doncaster saw prices rise by 18.3 percent, while Bassetlaw saw a 3.4 percent growth.

Other cities seeing a big house price rise included Southampton, Leeds and Edinburgh.

Homebuyers can now expect to pay £240,359 for a home in Southampton, £226,923 for a property in Leeds and £276,831 in Edinburgh.

According to Halifax’s latest House Price Index (HPI), the average house price across the whole of the UK grew by 9.9 percent in the year to September.

Despite the annual growth, house prices actually decreased marginally in September by 0.1 percent. A typical UK property cost £293,835, according to Halifax’s latest HPI. 

Wales remained at the top of the table for annual house price inflation with an average property costing £224,490.

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