Average UK house price hits £292,000 - biggest jump in 19 years

·4 min read
house prices A row of houses in Elgin Crescent, in Notting Hill, London, where a terraced house is currently for sale for over �12 million. The borough of Kensington and Chelsea is one of the most polarised in Great Britain, with some of the most expensive real estate in the UK just a short walk from several of the most deprived wards in the country - including the area around the Grenfell Tower. Picture date: Wednesday July 12th, 2017. Photo credit should read: Matt Crossick/ EMPICS Entertainment.
Property experts expect the cost of living crisis to curb what has been rapid growth in house prices: Photo: Matt Crossick/ EMPICS Entertainment.

UK house prices increased at the highest annual rate since May 2003 in the year to July, according to the Office for National Statistics (ONS).

Annual house price growth in July was 15.5%, up from 7.8% in June, marking the biggest increase in 19 years.

The average UK house price was £292,000 in July 2022, which is £39,000 higher than this time last year.

Average house prices increased over the year in England to £312,000 (a 16.4% annual increase), in Wales to £220,000 (17.6%), in Scotland to £193,000 (9.9%) and in Northern Ireland to £169,000 (9.6%).

Read more: FTSE 250: Housebuilder Redrow sees revenue jump to £2.14bn but market is cooling

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said the latest house price jump “is the result of changes to the stamp duty holiday last summer. It doesn’t affect the outlook for the market, which is facing real challenges”.

She continued: “Distortions from the end of the most generous period of the stamp duty holiday last June are playing an enormous role in price rises.

“There was a burst of demand last June, and people rushed to get sales over the line before the deadline – pushing prices up. As a result, we had a lull in July.”

Average UK house prices increased by £6,000 between June and July this year, compared with a fall of £13,000 between the same months last year.

Gabriella Dickens, a senior UK economist at Pantheon Macroeconomics, said: “Looking ahead, we expect house prices to fall outright in the second half of the year, given the size of the rise in mortgage rates.”

The jump in annual inflation was mainly because of “a base effect” from the falls in prices seen this time last year, as a result of changes in the stamp duty holiday, the report said.

Tom Bill, head of UK residential research at Knight Frank, said: "The large jump in house prices recorded in July tells us more about how a stamp duty holiday can alter the course of the housing market than where prices are headed next.

"The new government's energy support package combined with record low unemployment will help oil the wheels of the property market but rising mortgage rates will ultimately curb the double-digit price growth seen over the last two years although we don't expect prices to fall.

"The government is effectively in pre-election mode and further tax cuts will benefit the housing market in the short-term. The risk is that fiscal largesse today means rates will eventually need to rise faster."

ONS figures also showed that private rental prices paid by tenants in the UK rose by 3.4% in the 12 months to August 2022, up from 3.3% in the 12 months to July 2022.

Read more: UK average rent hits £1,051 a month

Private rental prices increased by 3.4% in England, 2.5% in Wales and 3.6% in Scotland in the 12 months to August.

Gareth Atkins, managing director of lettings at Foxtons, said: “This August had the highest level of rental demand we’ve ever seen, as London remains one of the most attractive cities to work and live in.

“This unprecedented demand, paired with low supply, has pushed prices and budgets up across the capital. We can see multiple factors driving the lack of supply in 2022 – about three-quarters of Foxtons tenancies are renewing and there is a strong sales market in London.”

Karen Noye, mortgage expert at Quilter, said: “The housing market has so far remined resilient despite the ongoing cost-of-living crisis.

“While the latest UK inflation data released this morning showed a slight fall to 9.9% last month, a higher peak is still expected to materialise over the coming months and as such the Bank of England is expected to continue hiking interest rates and the current resilience may well falter as a result.

“Coupled with rising interest rates, soaring energy prices will also make buyers more cautious.”

She said that despite the recent energy price cap announcement “many will still feel the squeeze financially and this could put a halt on people’s plans to move home”.

Watch: Will UK house prices ever fall?