UK House Price Growth Stalls in June, are Outright Predictions for Falls Proving Correct?

New data from property portal Zoopla confirms house price growth in the UK virtually stalled in June, underscoring economist warnings that house price falls loom.

Zoopla says their index shows average UK house prices are up +8.4% on the year to June.

But momentum is slowing as average house prices were broadly unchanged in May, rising by just 0.1%.

This a day after Nationwide's House Price Index revealed a slowing in annual UK house price growth to 10.7% in June, from 11.2% in May.

Nationwide's month-on-month house price growth registered at 0.3% as the price of a typical UK home climbed to a new record high of £271,613, with average prices increasing by over £26,000 in the past year.

Zoopla says there are several factors signalling that the impetus in the market seen over the last two years is starting to ease.

"The level of buyer demand in the market, while still high compared to the five year average, is beginning to recede to more normal levels," says Zoopla in a statement detailing their latest findings.

Independent economics research consultancy Pantheon Macroeconomics says UK house prices will fall in the second half of 2022 as a surge in mortgage rates continues over the summer says .

"The recent surge in risk-free interest rates and mortgage rates has been so severe that we now doubt that a period of falling house prices can be avoided," says Gabriella Dickens, Senior UK Economist at Pantheon Macroeconomics.

Buyers are now facing average rates of 3.37% for a fixed five-year rate loan, according to Moneyfacts, compared to 2.64% in December.

This increases the annual cost of a loan for an average priced home (£250,000) with a 25% deposit and 25-year term by £870.

However, Zoopla are not expecting house prices to decline outright in 2022.

"The economic outlook, and multiple base rate rises, will act as a drag on sentiment and activity as we move through the rest of the year, but activity levels so far this year still indicate transactions at 1.2 million across the UK," says Zoopla.

Zoopla anticipates annual house price growth will reach 3% by year end.

Nationwide says the market is expected to slow further as pressure on household finances intensifies in the coming quarters, with inflation expected to reach double digits towards the end of the year.

But they expect the housing market to remain resilient thanks to a strong UK labour market where the number of job vacancies has exceeded the number of unemployed people in recent months.

The unemployment rate remains close to 50-year lows, "at the same time, the stock of homes on the market has remained low, which has helped to keep upward pressure on house prices," says Robert Gardner, Chief Economist at Nationwide.

But Dickens says "changes in mortgage rates have been a good guide to changes in year-over-year growth in house prices in the past," says Dickens.

She calculates year-over-year growth in house prices could decelerate by as much as 30 percentage points over the next year.

This would imply that UK house prices would fall outright by about 20%.

But there are further factors to consider that would cushion against such a fall, most notable the strong jobs market that conveys security to home owners and prospective buyers as well as changing work habits.

"We now expect house prices to fall by around 2% in the second half of the year, rather than just hold steady," says Dickens.