Annual house price growth 'peaks' at 12.6% in October: UK HPI

Average UK house prices increased by 12.6% over the year to October, up from 9.9% in September, according to the latest UK House Price Index from the ONS and Land Registry.

The increase in the annual percentage change was partly caused by a sharp fall in UK average house prices in October 2021, following changes to stamp duty.

Steadily increasing prices throughout 2022 resulted in the average UK house price reaching a record high. The average UK house price was £296,000 in October 2022, which is £33,000 higher than this time last year.

Average house prices increased over the year by 13.2% in England, 11.8% in Wales, 8.5% in Scotland, and 10.7% in Northern Ireland.

The North East continued to have the lowest average house price of all English regions, at £168,000 in October 2022, which is a record high for the region.

The North East has changed from being the region with the lowest annual house price inflation in September 2022, to the region with the highest house price inflation in October 2022. Average prices in the North East increased by 17.3% in the year to October 2022, up from an annual percentage change of 6.7% in September 2022.

Average house prices in the North East increased by 1.9% between September and October 2022; the largest rise in average house prices of all regions. In contrast, average house prices in the North East decreased sharply by 7.3% in the same period last year.

London was the region with the lowest annual house price inflation, with average prices increasing by 6.7% in the year to October 2022. This was down from an annual percentage change of 7.4% in September 2022. London’s annual percentage change was slowed by average London house prices falling by 0.9% between September and October 2022. London was the only region in the UK where average house prices decreased this month.

Paul McGerrigan, CEO at Loan.co.uk, said: “All indicators suggest that after the recent unbridled price growth, some of which was driven by exceptional Covid related measures, the property market is reaching its peak, with borrowers squeezed by rising interest rates and stubbornly high inflation.

“Whilst the October House Price Index figures shows an annual increase in average house prices of 12.6% - to a high of £296,422 - this is about as far as it will go, though we don't predict a slump in values. Interest rate increases are designed to quell inflation but they also create affordability challenges for borrowers which will drive a gradual cooling in the market.

“The underlying fact remains, there continues to be a considerable shortage of housing supply which should maintain a strong baseline for mid to longer term house prices. Getting inflation under control continues to be the biggest challenge for the UK economy and until this is achieved the pressure will remain on the MPC to move bank rate upwards. The balance is a fine one and must be managed with extreme caution.

“Today’s slight inflation rate drop demonstrates there is light at the end of the tunnel, and, whilst there may be a bumpy few quarters ahead, government stability and economic prudence should prevail through the second half of next year.”

Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: "At first glance, this most comprehensive of all the housing market surveys seems to demonstrate considerable resilience. However, digging a little deeper, these numbers reflect what was happening in late summer and early autumn, not what we’ve been seeing in our offices since.

"Most demand, fuelled by mortgages arranged on more advantageous terms, seems to have been satisfied. A better test will come in early 2023 when a large proportion of buyers have to decide whether they will continue to press the pause button or review their searches in response to lower mortgage rates and inflation figures."