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House prices in Great Britain hit a record high in June but are likely to start falling during the next few months as five interest rate rises and a worsening cost of living crisis finally start to put the brakes on the property market’s record-breaking run, according to Rightmove.
The property website said asking prices hit a record for a fifth consecutive month in June, rising by 0.3% – or £1,113 – to reach £368,614. However, this was the smallest monthly increase since January, with the site saying: “The exceptional pace of the market is easing a little.”
Rightmove added: “After a very strong first half of the year, it is likely that the housing affordability crunch will have a greater impact on market behaviour in the months ahead, with further interest rate rises anticipated during that period.
“This, alongside more choice coming on to the market for buyers and the usual seasonal variations we would expect, means there are likely to be some month-on-month price falls during the second half of the year.”
As a result, the website is expecting that the annual rate of price growth will be slashed almost by half from its current 9.7% to about 5% by the end of this year.
Rightmove also warned that a “conveyancing logjam” meant that those looking to sell their property needed to come to market during the next few weeks to be in with the best chance of moving before Christmas. A spokesman said that on average it was currently taking 150 days to complete a purchase after agreeing a sale – 50 days longer than during the same period in 2019.
In a separate analysis, the EY Item Club – an economic forecasting group – took a more optimistic view of the housing market’s likely fortunes. It predicted house prices would enjoy “continued growth”, with a crash “unlikely”, and estimated the typical home would end this year worth £52,000 more than it was just before the start of the coronavirus pandemic.
It is predicting prices will end this year 8% higher than they were at the end of 2021, and will then rise by smaller amounts – 1.8% and 1.2% – in 2023 and 2024 respectively.
The group, which bases its figures on the Treasury’s model of the UK economy, said that while the rate of house price growth was likely to slow as a result of stretched affordability, rising interest rates and falling household incomes, other factors such as shortages of homes for sale, low unemployment and the “unequal effects” of cost of living pressures would stop prices from falling.
The EY Item Club is predicting that an average UK home will cost £283,000 by the end of this year. That would be 23% higher than the figure of £231,000 during the first three months of 2020, just before the start of the pandemic.