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Surging House Prices Expected to Slow, but Buyer Demand Remains High

Sun rising above a traditional British housing estate with countryside in the background
(Image credit: Getty Images)

Surveyors expect rising house prices to soften amid the uncertain economic landscape, despite buoyant market activity, according to the latest Royal Institution of Chartered Surveyors (RICS) Residential Market Survey.

The April RICS survey revealed that while a large majority of surveyors (62%) expect house prices to rise over the next 12 months, this is down from 78% in February.

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The survey findings come following a warning from the Bank of England last week that inflation could exceed 10% later this year, and one week after The Bank raised interest rates to 1% - which could eventually impact the housing market.

An easing of relentlessly surging house prices would be welcomed by those looking to buy before renovating a house, but surveyors have warned not to expect price drops any time soon.

The RICS survey showed a +80 percentage point difference between the proportion of surveyors reporting rising prices and those reporting a fall, up from +74 in March.

"Even though there is a lot of caution about the future economic landscape, it seems that limited supply available on the market, coupled with steady demand growth, are still the overriding drivers of house prices," RICS economist Tarrant Parsons said.

Will House Prices Keep Rising?

In short, it is likely they will. Prices had been expected to cool this year, particularly against the backdrop of the cost of living crisis, but Nationwide's April house price index revealed that average property prices have now reached £267,620, the ninth straight month of growth.

The primary reasons behind this growth, which became red hot during the Covid pandemic, included the the stamp duty holiday and the new mortgage guarantee, as well as the 'race for space' which saw more people looking for bigger properties following the move to working from home.

One major outcome of the government's measures taken during the pandemic was a shortage of properties, which has become a principal reason for asking prices rocketing up. 

Detached homes have increased by £68,000 since the start of pandemic, a 22% rise, Nationwide says, with people working from home seeking out bigger properties. And demand again outstripped the number of homes for sale in April - RICS said in its survey that members reported an eighth successive month of rising numbers of enquiries from potential homebuyers.

Rising inflation could eventually impact the housing market

House prices could yet fall amid the escalating cost of living crisis (Image credit: Getty Images)

Yet, the impact of soaring inflation, energy price rises and increasing interest rates could yet prove influential and make it more expensive to buy a house. The Bank of England has increased interest rates four times since December in the last four months, but will this really impact the housing market? Experts believe that if it does, it won't happen anytime soon. 

Tim Bannister, director of property science at Rightmove, says: “It will take time for the rise in interest rates to feed through to the market, and despite further rises being a possibility this year, right now the data suggests this is not dampening the desire for people to move." 

He added, however: "We do anticipate affordability constraints and these economic headwinds such as rising interest rates to have more of an effect on the market later in the year."

Tom Bill, head of UK residential research at Knight Frank, said: “Low supply is the rather unglamorous reason that prices have been so high over the last year, but we expect to see single-digit rather than double-digit annual growth by the end of the year as both stock levels and mortgage rates increase."

Notably, Nationwide's April data also revealed that the annual rate of house price increase slowed to 12.1% in April from an 18-year high of 14.3% in March.

Where are House Prices Rising the Most?

Wales has seen the highest rate of growth so far in the UK in 2022. In its April house price index, the Office for National Statistics (ONS) said Wales experienced a house price rise of 14.2% in February to £205,000, while Nationwide reported a 15% increase in its March house price index. 

Meanwhile, England grew by 10.7% to an average of £296,000 in February, the ONS said. Prices increased by 11.7% to £181,000 in Scotland, and by 7.9% to £159,000 in Northern Ireland.

The clamour to live in Wales follows a stellar 2021 for the country, where it was the regional asking price hotspot, according to Rightmove. Moreover, Mountain Ash in Wales was the place in the UK where house prices rose the most in 2021.

London, meanwhile, has been the weakest performing region in 2022 with house price growth of 7%.

Jack has worked in journalism for 11 years and is the News Editor for Homebuilding & Renovating, a role he has had since 2019. He strives to break the most relevant and beneficial stories for self builders, extenders and renovators, including the latest news on the construction materials shortage and hydrogen heating. In 2021 he appeared on BBC's The World at One to discuss the government's planning reforms. 

He enjoys testing new tools and gadgets, and having bought his first home in 2013, he has renovated every room and recently finished a garden renovation.