UK house prices surged £3,000 in March, according to a new analysis of asking prices by Rightmove (20 March).
With spring having arrived - a time of year when homebuyers usually become more active in the housing market - the online property listing firm said it appears as if confidence is returning to the market. It comes after average asking prices only rose by £14 month-on-month in February - the lowest increase seen between January and February since Rightmove’s records began in 2001.
The news has arrived during a week in which the Bank of England is set to make its next interest rates decision. With the Office for National Statistics (ONS) also set to reveal the latest inflation figures, the coming days are likely to be key for to the short-term direction of property prices. Higher interest rates could force mortgage rates to rise, while any hold up in the decline of the inflation rate could see consumers opt to rein in spending.
The cost of living crisis and economic turmoil since the short-lived Liz Truss premiership has seen house prices slip from August 2022’s all-time high. But with news that the UK economy is on course for a smaller recession than initially feared could serve to boost activity.
So what is the latest house price data according to the latest Rightmove House Price Index (HPI) - what could happen in 2023? Here’s everything you need to know.
What is the Rightmove House Price Index?
The Rightmove House Price Index (HPI) is a tracker of the UK housing market that’s run by one of the country’s biggest property websites.
It takes into account the asking prices of up to 200,000 homes being advertised by 13,000 estate agents UK-wide every month - although it excludes central London given Rightmove says the “normal housing ladder is not really applicable” there. Rightmove says this means its measurement covers 95% of the UK market.
The HPI differs from other key house price yardsticks, such as the Halifax HPI, in that it looks at home asking prices as they come to market. Other indices tend to look at prices later in the buying process, including at the mortgage application stage and final sales prices as listed with public body the Land Registry.
So, in essence, the Rightmove HPI’s strength is that it captures sellers’ sentiments closer to how they currently are. It breaks down asking prices into three different sectors:
- First-time buyers: Rightmove says the figure tends to cover properties that a first-time buyer would be more likely to consider, such as two-bed homes.
- ‘Second stepper’ (i.e. those moving out of their first home): covers three and four-bed properties, but excludes four-bed detached houses.
- Top of the ladder buyers: includes five-bed homes and above, as well as four-bed detached houses
What does latest Rightmove House Price Index show?
According to the latest Rightmove House Price Index covering the period between 1 and 14 March, average home asking prices rose 0.8% month-on-month, meaning they are 3% above where they were at the same point last year. While the monthly figure marks a return to growth, the annual growth rate has slipped back from 3.9%.
It means the average UK asking price now stands at £365,357 - £2,906 above February’s figure. But, this increase was still below average for the time of year, with the housing market usually 1% up in the month of March, Rightmove said.
Most of the increase was sparked by ‘top of the ladder’ sellers, as four-bedroom detached houses and homes with five or more bedrooms saw prices rise 1.2% (£7,947) on average to £658,702. It means they recovered the losses made the previous month. However, the property listing website said the rise could be over-optimistic as agreed sales in the sector are 10% behind where they were in the more normal market of 2019.
First-time buyer homes went up by more than £1,000 (0.5%) to £224,453, while those moving up the housing ladder saw a £1,500 (0.4% rise to £337,119. The number of agreed sales for first-time buyer homes is now down 4% on March 2019 having been 15% down at the start of the year and 30% lower in the immediate aftermath of the fiscal event. For second-steppers, the market is 13% slower.
The strongest monthly growth was recorded in the North East where prices rose 2.5% on average, meaning they are 4.7% up year-on-year at £184,000. Wales (£256,596) and the South West (£385,171) both recorded 2% rises, with Wales still 4.3% up compared to last year and the South West 4.1% higher.
The biggest reversals were recorded in the East of England (-0.2%) and London (-0.1%) - although both still remained more expensive than they were last year, with an average property in the East costing £415,836 and a typical place in the capital now having an asking price of £680,800. Scotland’s growth rate also declined from 7.5% month-on-month to just 0.1%, making the average price £182,478.
Are house prices coming down in 2023?
Housing market outlooks have tended to be gloomy in recent months, but Rightmove’s director of property science Tim Bannister said the latest HPI figures showed “stability and confidence continuing to return to the market”.
He said: “While higher mortgage rates and economic headwinds raise challenges, many potential home movers who were effectively side-lined in the frenetic bidding wars of the last two years will find that a slower-paced market gives them time to plan and secure their next move as we enter the traditionally busy spring-buying season.
“Lagging sales agreed in the larger homes sectors are likely to be caused by a combination of factors including fewer pandemic-driven moves to bigger homes, a more cautious approach to trading up due to the cost of living, and even perhaps concern over the running costs of a larger home. Meanwhile sales in the first-time buyer sector are likely being helped by some deposit assistance from family. The differing performance of smaller and larger homes highlights the multi-speed, hyper-local market.”
Mr Bannister did not give more of an outlook as Rightmove says market conditions are changeable. It referenced the upcoming interest rates and inflation announcements, adding that it needs to see how the mortgage market will react to the news over the coming weeks.