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Why we are set to witness a slowdown in house prices

Warning comes as new figures indicate cost of living crisis impacting market

THE house price surge is set to fall away as the cost of living crisis bites, a leading property association warned today.

New figures recently revealed the average asking prices of a house in Britain has hit a new record of £360,000.

According to RightMove the median asking price has surged by £19,082 over the past three months, reaching £360,101.

Some 53% of properties are selling at or over their final advertised asking price, the highest percentage Rightmove said it had ever seen.

Properties are achieving 98.9% of their final advertised asking price on average and the time taken to sell has also halved over the past three years – from an average of 67 days three years ago to 33 days now.

Jonathan Rolande from the National Association of Property Buyers, said we should now brace ourselves for prices to “taper away”.

He said: “The seemingly never ending rise and rise of the property market continued through April, with demand from buyers and the knock-on increase in prices defying most forecasts.

“This looks set to carry on through May which, traditionally, is one of the best months for property sales.

“However we should expect demand to taper off after this as the reality of the cost of living crisis kicks in. I suspect we will start to see an impact by mid to late June.

“I wonder if buyers will be quite as keen to trade up once they work out their budget and see just how much their gas and electricity has surged in price. They may also be worried about how much more they are being asked to pay for council tax too. Mr Rolande, the co-founder of House Buy Fast, added: “Don’t expect demand to fall off a cliff: there are far too many people clambering for each property but we are likely to see an end to the double digit rises many regions have now been recording for months.”

His warning comes as new research indicates how seven in ten (70%) people looking to buy their first home in the next 12 to 24 months are delaying purchases as the rising cost of living impacts their ability to save towards a deposit.

New research from Nationwide Building Society shows how, on average, prospective first-time buyers say they will delay buying a home for nearly two years, with 19 per cent saying they are pressing pause on their homeownership aspirations for more than three years. The South West (23%) and Wales (28%) are the areas where potential homeowners are most likely to delay that purchase for more than three years.

The poll of more than 2,000 people who are looking to buy their first home within the next five years reveals a deposit is the biggest hurdle, with 28 per cent claiming it is the most difficult part of home ownership to overcome. Indeed, a 10 per deposit on a typical first-time buyer home is at nearly 60 per cent of gross annual income – a record high.  By contrast, just 14 per cent say it’s the ability to borrow enough and 12 per cent believe keeping up with mortgage payments to be the main challenge.

Nationwide’s research shows that around nine in ten (88%) have had their ability to save for a deposit impacted due to the rising cost of living. This rises to 93 per cent for Scotland, 98 per cent for Wales and 98 per cent for Northern Ireland. Even the lowest UK region – Greater London – records 82 per cent.

That has led to close to half of those impacted (48%) reducing the amount they save towards their deposit, with more than a third (38%) using the money already earmarked as a deposit to pay towards other bills.

According to the poll, the average age prospective first-time buyers hope to buy their first home is 27. However, three in ten (30%) say it is unlikely they will be able to purchase a home by the age they hoped, with a third (33%) admitting they’ve already gone past that age.

The struggle to get onto the property ladder is also driving people to think about buying with someone else to help make that first home purchase a reality. Nearly two thirds (65%) believe they need to have someone else alongside them, such as a friend, family member or partner, to be able to afford to own a property and that figure is mirrored in reality with 66 per cent admitting they were planning to buy with a partner or spouse – only 24 per cent said they were going to buy alone.

Soaring house prices meanwhile are pushing 4.3m homes into a higher stamp duty bracket.

A £29,000 rise in the price of an average home in the UK has seen an estimated 4.3m homes pushed up into a higher stamp duty bracket since the start of the pandemic, according to newly released research from Zoopla.

Around 28% of the affected properties, according to the data, have now moved above the initial £125,000 stamp duty threshold in England and Northern Ireland. In Wales and Scotland, rising house prices also mean that a further 360,000 homes have been pushed across the initial threshold at which stamp duty becomes payable (£145k in Scotland, £180k in Wales).

This is due to an increase in average UK house prices which have risen £29,000, or 13% since the beginning of the pandemic in March 2020 – including a rise of 8.3% in the last year alone. The increase in house prices is almost equal to the current national average annual salary of £31,096, as prospective buyers continue to simultaneously grapple with increased living costs around the country.

But despite a tumultuous economic backdrop thanks to the pandemic, there have been consistently high levels of buyer demand over the last two years, set against constricted supply, which has contributed to the overall increase in UK house prices. This demand has been reflected by HMRC who revealed that – despite the stamp duty holiday in 2021 – stamp duty receipts in England and Northern Ireland reached £18.6billion in the year to March 2022, an increase of £6.1billion on the previous year.

First-time buyers require thousands more to purchase their first home compared to two years ago

Rising house prices are also having a huge effect on those keen to get their foot on the property ladder. First-time buyers are now spending an average of £225,000 to buy their first home – an increase of £27,000 compared to just two years ago.