UK house prices set to grow at a slower pace as supply picks up

The latest House Price Index from Zoopla suggests that house price growth is slowing and supply is increasing. Here’s a brief breakdown of the data.

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House price growth in the UK is showing signs of slowing. This is according to the latest House Price Index from Zoopla. The index also shows that the supply of new homes for sale has exceeded 2021 levels across all areas of the UK.

So, what does this mean for buyers? Also, what’s the outlook for the future? Let’s take a look.


What’s the latest on house price growth?

According to Zoopla, average house prices increased by 7.8% in the year to the end of January 2022. This brought the average price of a house to £244,100.

However, there are signs that growth is slowing. For example, in the three months to January, house prices only rose by 0.9%. This is the slowest pace of growth since August 2020.

Zoopla further says that the market is highly localised, with growth ranging from 16.6% in Powys, Wales to -2.2% in the City of London.

There is also a significant difference in price growth across property types. For example, while the price of semi-detached homes rose by 9.1% in the year to January, flat prices only increased by 2.6%.

What’s happening with supply?

Zoopla says that in January and February, new listings were up in every part of the UK compared to 2021.

More specifically, in the four weeks to 27 February, the flow of new supply of homes was 5% higher than the five-year average.

Commenting on these findings, Grainne Gilmore, head of research at Zoopla said: “The new supply of homes has risen above 2021 levels and is approaching the scale of new listings seen at this time of year before the pandemic hit in 2020, signalling that the market is starting to move back towards more normal conditions.”

What does the future hold?

Despite the fact that supply is increasing, there is still a significant supply and demand mismatch. In February, buyer demand for homes was 70% above the five-year average, while the total stock of homes available for sale was 43% lower.

Gilmore mentions that this imbalance “will continue to underpin pricing in the coming year”. However, she predicts that annual house price growth will slow down in the course of 2022 “as economic headwinds, including mortgage rate rises and the rising cost of living, put the brakes on price rises”.

More specifically, growth is expected to hit a slower rate of between 2% and 4%.


What’s the takeaway for buyers?

The uptick in new supply is undoubtedly great news for buyers as they are likely to have more options.

Also, as more homes are listed, current homeowners looking to move but previously put by the lack of options are more likely to do so now. That said, overall demand is still expected to remain high. This implies that while there may be more options, buyers will still have to compete fiercely for them.

Zoopla’s index data also revealed that demand for flats is lower and that prices have grown at a much slower rate than houses. So, if you are looking to buy and don’t mind compromising a little on space, a flat might represent better value at the moment.

What if you can’t afford to buy right now?

Though price growth might be slowing, house prices remain near all-time highs. As a result, not everyone will be able to take the leap right now.

If you aren’t in a position to buy at the moment, the best thing you can do is to continue saving. This way, you will be ready to pounce if and when an opportunity presents itself in future.

It’s also worth remembering that there are tools and schemes available to help you save for a home faster.

One great tool worth considering is a lifetime ISA. This is a tax-free savings account designed to help those aged 18-39 at the time of opening save for their first home or retirement. Each year, you can put up £4,000 in a Lifetime ISA and enjoy a free government top-up of 25%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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