UK property market maintains strong growth
House prices keep rising to record levels as the UK property market maintains a strong momentum.
According to the latest House Price Index report by one of UK’s biggest mortgage lender Halifax, the average UK house prices rose again in March, registering a monthly increase of 1.4%, or £3,860 in cash terms - the biggest jump since September 2021.
Halifax says the average UK property has increased in value by £28,113 in the past 12 months. The year-on-year rise is on a par with average annual UK earnings of £28,860 before tax. After recent growth, the average house price now sits at a record high of £282,753. This is an eleven percent increase YoY as growth continues to track around its highest level of inflation since mid-2007.
“The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances,” said Halifax’s managing director Russell Galley. “Although there is some recent evidence of more homes coming onto the market, the fundamental issue remains that too many buyers are chasing too few properties”.
Galley indicated that in the long term they know that “the performance of the housing market remains inextricably linked to the health of the wider economy". For those unaware, prices rose by eleven percent over the year to March, Halifax stated.
House prices saw annual growth of eleven percent in March, the highest level since 2007.
Rival lender, the Nationwide, recorded a fourteen percent rise in property values over the same 12 months - the fastest annual growth for 17 years. The the Office for National Statistics (ONS) said the price of an average UK home stood at £277,000 in February, an increase of £27,000 on the same month last year.
Wales led the way in terms of the largest national house price increase, with the average property climbing in value by 14.2% to £205,000 in the 12 months to February. Scotland which recorded a price rise of 11.7% to £181,000 was next. England registered a rise of 10.7 percent to £296,000, while prices in Northern Ireland climbed 7.9 percent to £159,000.
Average prices in London rose by 8.1% over the same period. This was the weakest of the UK’s regions, although the figure was up sharply from the 3.8% registered by the capital in January earlier this year.
In terms of UK regional performance, the South West and East of England each recorded the strongest annual growth with prices rising by 12.5% in the year to February 2022. New data shows that demand is returning fast in the UK for city-centre properties, which buyers had avoided during the Covid-19 pandemic in favour of big houses in rural locations.
However, Galley warned that as in the U.S., rising interest rates and other economic headwinds may put a damper on the rapid pace of price growth as 2022 wears on, “… we know the performance of the housing market remains inextricably linked to the health of the wider economy. There is no doubt that households face a significant squeeze on real earnings, and the difficulty for policy-makers in needing to support the economy yet contain inflation is now even more acute because of the impact of the war in Ukraine.
“Buyers are therefore dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year,” Galley noted.
A range of forecasters - including the Office for Budget Responsibility - expect the speed of increase to slow in the next few years.
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