Nick Leeming, Chairman of Jackson-Stops, comments on today’s ONS House Price Index:

"On the same day that inflation has reached double figures, a slight sense of restraint is starting to creep into the property market. The impact of the higher cost of borrowing and less consumer spending power is likely to gradually filter through over the rest of the year. For now, an expected seasonal dip in activity over the summer months should remain front of mind before we declare a market adjustment. Committed buyers and those at the higher end of the market are remaining resolute in their bid to be moved in by Christmas, helping to maintain house prices far above the levels we would have expected to see prior to the pandemic.

“The Bank of England’s decision this month to raise interest rates to the highest level in 27 years to counter rising inflation could be interpreted with concern. However, in reality a base point of 1.75% is still an environment that encourages borrowing, far from the dizzying heights of 1979’s 17%, or 1991’s 15%. It should also be remembered that high inflation has a beneficial impact for borrowers in reducing both the real cost of interest and loan repayments.

“We’re continuing to see a very active market at the top end, with cash buyers pushing forward with sales, unaffected by wider economic uncertainties. Stand out properties in desirable locations and with state-of-the-art features will naturally still be in high demand. That being said, sellers should be realistic when deciding on a property’s asking price. Homes that are optimistically priced risk being overlooked in a market that has seen a number of delays in the buying process, with heightened activity levels causing a wider transaction backlog. The Autumnal months will provide the market with a clearer indication of how buyers will respond to an increasingly uncertain financial environment. Regardless, everyone is in agreement that a sudden drop in house prices is out of the question, with strong buyer demand, a healthy borrowing market and buoyant employment keeping the scales level, despite the wider economy contracting. There continues to be a lot of buyers and sellers to remain optimistic about, especially those committed to locking in more favourable mortgage deals before the next rate rise from the Bank of England. Sellers we speak to are keen to capitalise on what are overall still record house prices, which remain higher year-on-year at 7.8%.

“Jackson-Stops data reflects this, with pockets of hot markets particularly in the South East and London achieving fast sales at guide price on a regular basis. Our Pimlico branch, for instance, noted agreed deals were up 20% in Q2 versus Q1, consistently averaging 98% of the guide price for sellers.”