The average asking price for first-time buyer homes has soared to a record level, the latest Rightmove House Prices Index (HPI) has revealed.
People looking to buy their first home now have to fork out almost £225,000 on average. It comes as mortgage rates remain significantly higher than they were just 12 months ago, while a broader cost of living crisis is reducing many people’s purchasing power at a rapid rate.
The Bank of England is expected to put up its base rate again in May as it seeks to combat near-record levels of inflation. While the rate of price hikes in the economy fell in March, according to the latest Office for National Statistics data, it is not tumbling as quickly as economists had hoped.
However, hope appears to be on the horizon as the International Monetary Fund (IMF) said in April that it expects interest rates to fall back towards the low levels seen for much of the 2010s. It means a new era of cheap mortgages could be on its way when the current inflation crisis is brought under control.
So what does the latest Rightmove House Price Index tell us - what’s happening at a regional level?
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?
The latest Rightmove House Price Index, which covers the period between 12 March and 15 April, shows average asking prices remained relatively flat. They grew 0.2% (£890) on last month’s figure to £366,247.
Not only was this growth lower than usual for the time of year (spring usually sees prices jump by 1.2%, Rightmove says), but it also marked the latest slowdown in annual house price inflation, with the rate dropping from 3% to 1.7%.
Within the statistics, prices for first-time buyers are now at their highest level on record having grown 0.2% (£500) month-on-month to £224,963. Agreed sales in this sector are now 4% above 2019 levels (the last ‘normal’ year of housing market activity). The online property listing company says soaring prices for rented accommodation are continuing to push those who can afford to do so into buying their first home.
According to Rightmove director of property science Tim Bannister, these figures are “good for the health of the whole market” given first-time buyers are usually found at the beginning of buying chains. But, he cautioned that the housing market “remains a challenging environment” for these buyers given the new record average asking price has coincided with higher borrowing costs.
Second-steppers saw prices grow 0.7% (£2,000) to £339,359, while top of the ladder buyers saw a second consecutive monthly 1.2% hike (£8,000) to an average asking price of £666,566. Buyer demand is lagging in both categories, down 4% and 3% respectively on March 2019’s figures. Overall, agreed sales are down 18% on this time last year.
“Agents are reporting that many sellers have transitioned out of the frenzied multi-bid market mindset of recent years and understand the new need to tempt spring buyers with a competitive price,” Tim Bannister said.
“The current unexpectedly stable conditions may tempt more sellers to enter the market who had been considering a move in the last few years but had been put off by its frenetic pace. Buyers may have struggled to find a home that suited their needs in the stock-constrained market of recent years and will now find more choice available.
“However, those who have now decided to make a move should not wait around too long to make an enquiry if they see the right home for sale, as not only is the number of sales agreed now back to pre-pandemic levels, but homes are also on average selling twelve days more quickly than at this time in 2019.“
What’s happening to house prices on a regional basis?
The house price picture becomes more nuanced at a national and regional level within Great Britain.
The strongest growth in asking prices has been seen in Scotland, where sellers have hiked prices by 3.2% since last month to an average of £188,382 - although the country remains one of the cheapest places in the UK in which to buy a home. On a yearly basis, prices are 3.3% above where they were in April 2022.
At the other end of the scale, London has experienced a 0.5% dip month-on-month, which means prices are completely flat year-on-year at an average of £677,230. A typical property in the capital takes 65 days to sell - considerably longer than anywhere else in the country.
The only other regional market that was in the red on a monthly basis was the North East, where prices fell 0.1% to an average of £183,850. However, this typical asking price was still 2.1% up on last year.