Annual change in house prices in the UK 2007-2023

Residential property prices in the United Kingdom (UK) have increased dramatically since the start of the coronavirus pandemic. The annual house price change peaked at 14 percent in the 12 months prior to July 2022. House prices continued to rise in the following months, but at a slower rate. According to the Nationwide Building Society, the average house price exceeded 265,000 British pounds in the fourth quarter of 2022.

Increasing housing prices: a European phenomenon

The trend of increasing housing prices is not exclusive to the UK. When comparing residential property RHPI (price index in real terms, e.g. corrected for inflation), houses became more expensive in most European countries, with Luxembourg, Sweden, and Norway leading the ranking.

How has demand for UK housing changed since the outbreak of the coronavirus?

The easing of the lockdown was followed by a dramatic increase in home sales. In November 2020, the number of mortgage approvals reached an all-time high of over 107,000. One of the reasons for the housing boom were the low mortgage rates, allowing home buyers to take out a loan with an interest rate as low as 2.5 percent. That changed as the Bank of England started to raise the base lending rate, resulting in higher borrowing costs and a decline in homebuyer sentiment.