Double-digit house price inflation exposes distortions caused by stamp duty holiday
14th December 2022 10:50
by Myron Jobson from interactive investor
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interactive investor's Myron Jobson comments on the latest ONS House Price Index.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The 12.6% jump in house prices over the year to October 2022 does not mean the property market is heating up again. Instead, it lays bare the distortions caused by the stamp duty holiday – which ended in October 2021 and artificially depressed sales in the months after.
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“The reverberations of the violent gyrations in the money market in the fallout from the mini-budget in late September wreaked havoc on the mortgage marketplace – the full impact of which is only now starting to filter through to the property market. This is because it takes months before sales are completed and many of the mortgages for house purchases in October were likely agreed well before the mortgage market chaos following the infamous fiscal event.
“Other more up-to-date house price indices paint a picture of a runaway housing market that is running out of steam as affordability pressures from high inflation, a fall in real wages and the rise in mortgage rates bite.
“The harsh reality is that more and more wannabe buyers simply can’t make the numbers work. This is likely to bring house prices back down to earth following a meteoric surge in recent history.
“For many buyers, rather than stretching their finances too much now to buy, it might be more prudent to wait until they are a bit more comfortable financially. But there are no guarantees – the affordability squeeze could become more acute before easing, and personal circumstances might require you to buy a home.”
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