UK house prices grow at fastest pace in 17 years

House prices grew at the fastest annual pace for more than 17 years in March despite the cost of living crisis.

According to Nationwide, the price of an average home in the UK is now a fifth higher than at the start of the Covid pandemic. The building society pointed out that the housing market had "a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs.

Robert Gardner, Nationwide’s chief economist said “The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10% above pre-pandemic levels. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.”

Property prices increased by 14.3% in the past year, according to the Nationwide survey.

The cost of a typical UK home reached a new record high of £265,312, more than £33,000 higher than March 2021. Detached homes for example have shot up nearly £68,000 in price since the start of coronavirus pandemic. This rise equates to 22 percent, while average flat prices have increased by £24,000, or 14 percent.

UK's biggest mortgage lender indicated that “The continued buoyancy of housing demand may in part be explained by strong labour market conditions. The unemployment rate has continued to trend down in recent months ... ...Wage growth has accelerated, though it is running below inflation.

Nations – annual & quarterly price change. * Seasonally adjusted Credit: Nationwide Building Society.

The building society indicated that “The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit.” The society estimates that households accrued an extra c£190bn of deposits over and above the pre-pandemic trend since early 2020, due to the impact of Covid on spending patterns.” This equates to around £6,500 per household.

The UK government also mediated with stamp duty cuts, which subsidised the housing sector and helped to keep prices rising as soon as the market unfroze. However Gardner opined that nonetheless Nationwide thinks “that the housing market is likely to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high” while warning that the “labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.

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