House prices hit another record high in June - but there are “signs of a slowdown”

The average UK home now costs £271,613, but price growth is starting to cool, says Nationwide

Property signs outside a block of flats advertising homes for sale, let or sold
(Image credit: Getty images)

The price of a typical UK home has reached a new record high of £271,613 – but there are signs the market is slowing, as interest rates rise and pressure on household finances intensifies.

House prices rose 0.3% in June, according to Nationwide Building Society (opens in new tab). This follows a 0.9% increase in May.

Annual UK house price growth is slowing: prices rose 10.7% in June, down from 11.2% in May. The south-west overtook Wales as the strongest performing region, while London remains the weakest.

Robert Gardner, Nationwide's chief economist, said there were “tentative signs of a slowdown”, with the number of mortgages approved for house purchases falling, and surveyors reporting fewer new buyer enquiries. 

“Nevertheless, the housing market has retained a surprising amount of momentum given the mounting pressure on household budgets from high inflation, which has already driven consumer confidence to a record low,” he added.

According to Gardner, the resilient housing market is due to low unemployment and a continued low supply of homes. 

WILL HOUSE PRICES KEEP RISING?

Gardner expects house price growth to slow this year, with inflation forecast to reach double digits towards the end of the year, and further interest rate hikes from the Bank of England “which will exert a cooling impact on the market if this feeds through to mortgage rates”.

Iain McKenzie, chief executive of The Guild of Property Professionals (opens in new tab), a network of estate agents, agrees the housing market will continue to cool over the coming months.

“With an 11th consecutive month of house price rises and yet another record high, the market is in rude health, but the tell-tale signs that it’s losing momentum are becoming impossible to ignore,” he said.

"The strong employment rate and low housing stock are pushing the housing market upwards, while rocketing inflation and a slow ratcheting of interest rates are acting to pull it back downwards.”

WHERE ARE HOUSE PRICES RISING THE FASTEST?

The south-west has seen the biggest annual house price growth (14.7%), with the average property now costing £318,325, according to Nationwide. East Anglia has seen the second highest rise, at 14.2%, giving an average price of £289,024. Wales posted the third highest (13.4%, £208,309).

London continues to see the weakest growth across the UK, with prices up 6% over the past year. The average house price in the capital is £540,399.

McKenzie noted: "The trend of buyers fleeing congested cities continues, with London seeing the weakest growth, and the south-west, East Anglia and Wales being the strongest performing regions.

"Since the start of the pandemic, prices in the south-west have risen at almost double the rate of properties in London, and it’s hard to know whether demand in the capital will ever return to previous levels.”

Andrew Simmonds, director at Bristol-based Parker's Estate Agents (opens in new tab), said the south-west had been “exceptionally buoyant” for the past two years, “almost certainly due to post-pandemic living and working styles”.

He added: “We are seeing more stock enter the marketplace than we have experienced in the past 12 months, but buyers are now contracting back into their shells a little. The rest of 2022 will be interesting. I certainly do not see the same growth as previous years, perhaps fairly static values and certainly not prices falling…yet.”

Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.