Average UK house prices jump by £31k and inflation hits 9.1%

The Office for National Statistics (ONS) has revealed that the Consumer Price Index (CPI) rose to 9.1% in the 12 months to May 2022, up from 9% in April.

This is the highest CPI 12-month inflation rate in the National Statistic series, which began in January 1997.

Meanwhile, the Consumer Prices Index including owner occupiers' housing costs (CPIH) went up to 7.9% in the 12 months to May 2022 (up from 7.8% in April).

The largest upward contributions to the annual CPIH inflation rate in May 2022 came from housing and household services (2.79 percentage points, principally from electricity, gas and other fuels, and owner occupiers' housing costs) and transport (1.50 percentage points, principally from motor fuels and second-hand cars).

Rising prices for food and non-alcoholic beverages resulted in the largest upward contribution to the change in both the CPIH and CPI 12-month inflation rates between April and May this year.

The ONS has also published today (22nd June) the latest House Price Index, which revealed that average house prices in the UK rose by 12.4% over the year to April, up from 9.7% in March.

The average UK house price was £281,000 in April 2022 — £31,000 higher than this time last year.

Industry experts react to latest ONS inflation and HPI figures

Jatin Ondhia, CEO at Shojin:

“While May’s CPI figures represent little change from last month’s record hike, the tide remains strong and is set to continue rising, which could push inflation into double figures towards the end of the year.

“The combination of sustained and high inflationary pressure with sharp rate rises and generally tighter monetary policy constitutes a radically different macroeconomic environment, posing a serious threat to investment returns and consumers’ finances.

“As the global economic outlook darkens, investors must take the time to reassess their inflation toolbox and consider which assets are likely to help cushion their portfolios against further hikes.

“Maintaining a well-diversified portfolio and ensuring investments remain aligned with long-term goals will be key in navigating the challenges, and it should be expected that the defensive and income yielding capabilities of resilient assets, such as real estate, will stand out ever more sharply against the current economic climate.”

Giles Coghlan, chief analyst at HYCM: 

“If today’s CPI print tells us one thing, it is that the UK’s economic outlook looks very bleak indeed.

“Ultimately, policymakers have very little choice other than to hike interest rates to bring down inflation.

“Without adequate quantitative tightening, the Monetary Policy Committee (MPC) risks inflation spiralling wildly out of control and causing a wage-price spiral, which would be disastrous for the economy.

“As today’s inflation data came in at just a fraction below the market’s maximum expectations of 9.3% year-on-year, traders and investors should therefore watch for yet more aggressive action from the MPC in August.”

Gareth Lewis, commercial director at MT Finance: 

“With some chains collapsing because of rising costs, it will be interesting to see what will happen in coming months as the squeeze on incomes continues.

“While the lack of stock means the best houses are always going to sell, and sell well, the price rises we have seen are not sustainable.”

Mark Harris, chief executive at SPF Private Clients:

“With inflation soaring to 9.1%, cost of living increases and a string of rate rises from the Bank of England, there is growing concern around affordability and borrowing potential, as well as the potential knock-on effect to house prices.

“Mortgage rates remain competitive, although they are on the rise — borrowers need to move quickly to secure the best fixed rates as they are often pulled at short notice. 

“With service levels varying considerably between lenders, it may take longer than borrowers anticipate, particularly if their case is complex.”

Jeremy Leaf, north London estate agent and former RICS residential chairman:

“Price changes can reflect stock shortages, as well as regional and house type variations, as reflected in this, the most comprehensive of all the market surveys.

“We are seeing increasing nervousness about taking on debt at a time when buyers and sellers have no real clue as to when and how the rising cost of living will start to level out. 

“Nevertheless, continuing lack of choice and strong employment prospects means there is still little chance of significant price changes over the next few months at least.”

Anna Clare Harper, director at IMMO:

“The natural next question is, why are house prices still booming in the context of post-Covid, post-Brexit and mid-Ukraine turmoil? 

“The problem is much the same as that affecting the wider economy: shortage of supply — this is particularly acute for properties for sale and rent which are affordable, in places people want and need to live, and of good quality.

“Suitable, affordable housing shortages are being made worse by planning backlogs from lockdown, alongside labour and material shortages and inflationary pressures, alongside the fact that many new-build schemes are unaffordable to local people. 

“The result is an ongoing and growing constraint on the affordability of homeownership.”

Colin Bell, co-founder and COO of Perenna:

“Today’s news that the UK average house price has risen by 12.4% over the year to April 2022 will make for concerning news for first-time buyers, many of whom are already facing higher interest rates and a rising cost of living that could scupper their chances of stepping onto the property ladder.

“With the Help to Buy scheme coming to an end soon, the sector needs to rethink how it supports first-time buyers, now more than ever. 

“Flexible long-term fixed rate mortgages offer protection from interest rate rises and they can provide a solution to some of the barriers facing those looking to buy their first home. 

“They allow individuals to better manage their monthly outgoings, while offering the peace of mind, during this tough economic climate, that the monthly mortgage bill will remain unchanged.”

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