17 October 2022

House prices in Wales reach new peak as economic pressure builds

The average house price in Wales has reached more than £245,000 for the first time as the country continues to experience record price growth in the third quarter of 2022.

The figures have been released from Principality Building Society’s Wales House Price Index for Q3 2022 (July-September), which demonstrates the rise and fall in house prices in each of the 22 local authorities in Wales. 

The new average house price for Wales of £245,893 demonstrates a 12.4% annual increase, and a 2.2% quarterly increase. Property prices are also up in all 22 local authority areas when compared with the same time last year, with 16 authorities reporting double-digit annual price increases - above the current rate of inflation (9.9%). 

Nine local authorities report record highs for the second quarter in a row, with several of these authorities – Blaenau Gwent, Ceredigion, Flintshire, Rhondda Cynon Taf and the Vale of Glamorgan – reporting annual price increases of more than 15%.

Shaun Middleton, Head of Distribution at Principality Building Society, said: “It is slightly strange talking about house prices in Wales reaching new peaks when so much has happened at the end of the third quarter with the UK government mini-budget and continued cost of living pressures. Transaction levels remained relatively strong over the third quarter, helped in part by buyers wishing to complete their house purchase with the attractive mortgage deals they had previously secured.   

“With interest rates surging higher, meaning repayments on mortgages will become much more costly per month, the market faces significant challenges in the immediate future. Even though the Welsh Government has increased the Land Transaction Tax threshold from £180,000 to £225,000 in a bid to support first time buyers and those wishing to move homes, affordability will come under considerable pressure, which could mean that purchasing demand will reduce.”

Despite the continuing strong pattern of annual price rises and new record highs, the quarterly comparison is more mixed, with only 13 local authorities reporting quarterly increases, several of which are less than 1%. 

Principality’s Wales House Price Index estimates there were as many as 12,400 transactions in Wales in Q3, 13% higher than in Q2 and 1% lower than a year ago, but on a par with corresponding pre-Covid (Q3 2019) levels. Average figures show that sales of detached homes have increased 11% annually, while semi-detached and terraced properties have increased 13-14% annually. In contrast, flat sales report just a 1% increase year-on-year.

Shaun Middleton continued: “It must be remembered that higher energy costs and general rises in cost of living are increasing overall household expenditure which will have to be factored into mortgage lenders calculations when assessing borrowers’ ability to repay. This will reduce the amount lenders are able to loan to the borrower, make it even harder for first time buyers to obtain a mortgage and will also mean many people will be unable to obtain the bigger mortgage they need to move to their next home. For this reason, many are predicting a decline in house price inflation. However, there are many unknowns at this stage. 

“A lot does depend on any potential government interventions, as well as, of course, on the actions of the Bank of England with regards to future rate rises. By the time of the fourth quarter report, there will hopefully be more clarity on what the outlook is for property prices.”

For more information go to: www.principality.co.uk/mortgages/house-price-index

Published: 17/10/2022