House price growth will cool to become more in line with the longer-term average by the end of this year, as mortgage rates rise and home buyers become more cautious, a property website predicts.
The average UK house price has increased by 8.3% annually, pushing the typical property value to £256,000, according to Zoopla’s index for June.
This growth was well above the five-year average of 4.3%.
Many recent housing market reports have shown house prices continuing to hit record highs, despite the tough economy.
As the cost-of-living crisis tightens its grip, Zoopla said it expects the impacts will ripple through to the property market towards the end of 2022 and into 2023.
Rising mortgage rates are also expected to dent housing market demand.
But Zoopla said that, while demand for homes has slowed this year, it remains above the average when looking across the past five years.
Zoopla’s recent research indicated that changing working habits could help to fuel some demand in the market, with people working from home being particularly likely to have expectations about moving house.
It also suggested that the departure of some older people from the labour market during the coronavirus pandemic may trigger some house moves, with retirement often being a major factor in the decision to downsize and/or relocate.
In some instances, the cost-of-living pressures may be boosting the desire to move, to save on running costs and find better value for money, in turn supporting levels of demand and market activity, the website said.
By the end of the year, house prices are expected to be rising by 5% annually, according to Zoopla.
It added it expects to see 1.3 million sales completions in 2022 – 100,000 higher than it had forecast.
Richard Donnell, executive director of research at Zoopla said: “The ongoing impact of the pandemic continues to support a desire to move among home buyers.
“This is a big reason why the market is not slowing as fast as some might expect and demand remains for sensibly-priced homes, especially in more affordable areas.
“The housing market is not immune from higher mortgage rates which we are starting to see increase quickly.
“Buyer interest is expected to slow over the coming months as people tighten their belts and spend with more caution which will see price growth weaken further.
“While we don’t expect current trends to lead to a marked drop in house prices next year, buyers will become more wary and it is important sellers are realistic when pricing their homes to sell.”
Richard Davies, MD of estate agent Chestertons, said: “Although we would normally expect the market to slow down towards the summer, we are seeing a continuous uplift in buyer registrations.”