UK House Prices Break the £300,000 Barrier: What It Means for Buyers
Well, the UK property market has reached another milestone – the average house price has topped £300,000 for the first time. So, before you start daydreaming about the merits of mansion money or get fretting about how the average property now costs as much as a second-hand car and three months’ worth of groceries, let’s dig into the numbers and look at the picture in full colour. As always, the key to understanding it all is to focus on the incredible, unstoppable regional divergence that’s playing out across the country – with some places bearing little resemblance to others.
PROPERTY PRICES IN LONDON & THE SOUTH EAST RACING AHEAD? Prices are continuing to rise in London and the South East driven by strong demand and lack of supply while in the North prices are rising at a slower pace, often with little change. This is a macroeconomic theme and is linked to economic performance, migration and investment patterns.
The £300,000 price level that’s just been passed in this year’s house price inflation race is more than just a number. It represents a boundary that is having quite an impact on first-time buyers, and those looking to trade up. With mortgage rates still well above their pre-Covid Covid days, it’s still very difficult to stretch that household budget to be able to afford a new or replacement home.
Meanwhile, more data has shown that UK residential sales are still 19% lower than pre-pandemic levels, which may also suggest buyer activity is being held back by current market conditions, potentially because buyers are nervous about affordability issues, which are being exacerbated by high inflation, or due to the permanent shifts in how people live their lives, brought about by the pandemic. Meanwhile, vendors are facing arguably more difficult times than they did a few months ago, as consumers become more ruthless over pricing and tougher on the need for negotiation.
The regional split and sluggish national market really is more of an inconvenience than a disaster, and actually brings with it a few bonuses, such as spotting more affordable areas, and potentially more sustainable and better returns in others. The north will arguably give you better entry points due to the relatively stagnant growth rates of the past year, whereas the south continues to appear the better long term capital growth destination.
Practical Takeaways for Buyers:
- Don't just focus on the national or statewide average home price. The prices and deals for homes vary greatly depending on location.
- Your Budget If mortgage rates had not shot up in the spring, many people would be planning to buy a home that’s a bit larger. With rates still far higher than their pre-Covid levels, here are a few things to keep in mind when making your budget.
- Market Timing Think about when you might purchase the home, as current market conditions have the demand for homes low, even compared to pre-COVID times, leaving room for some negotiating with motivated sellers.
- First-time buyers might also want to consider northern regions as they look to start their property journey – prices are far less stressful and there's a little more give on affordability.
The Final Takeaway:
This week the average house price in the UK has broken through to £300,000. This is no more than a statistical event, and I don’t see the current market as being in a stable phase, but I do think that there are opportunities for those that are informed and able to time their entry and exit into the market effectively. The UK property market is going through a period of change.
