UK house prices hit record but growth expected to slow

The average UK house price increased by more than £3,000 ($3,738) in April, marking the longest run of monthly rises since 2016, according to a Halifax index.

The real estate consultancy said the average property value rose by 1.1 per cent or £3,078 last month.

Russell Galley, managing director of Halifax, said this was the 10th consecutive month that property values have increased, “the longest run of continuous gains since the end of 2016”.

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The typical house price rose by 10.8 per cent annually to set a record of £286,079 ($350,000).

At the current rate of growth, the price of a typical home could hit £300,000 ($370,000) by the end of the year.

However, Halifax said that remains unlikely given the economic conditions predicted.

Prices have increased by £47,568 ($58,000) on average over the past two years, the report said.

It took the previous five and a half years to make an equivalent leap, with values increasing by £47,689 on average between October 2014 and April 2020.

“The imbalance between supply and demand persists, with an insufficient number of new properties coming on to the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices,” Mr Galley said.

“There remains evidence that this demand is centred on larger family homes rather than smaller properties such as flats. Over the past year, prices for detached and semi-detached properties have risen by over 12 per cent, compared to just 7.1 per cent for flats.

“The net cash increase for detached properties, at just under £50,000 over the past year, is nearly five times more than for flats.”

House prices have continued to climb despite the cost-of-living crisis putting a financial squeeze on households.

Inflation is expected to hit at least 10 per cent in the coming months. The Bank of England raised the base rate to 1 per cent this week, pushing up costs for some borrowers.

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Mr Galley said the headwinds facing the wider economy could not be ignored.

“The house price-to-income ratio is already at its highest … level [7.2 times full-time average earnings typically] and with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year,” he said.

Across the UK, Halifax said Northern Ireland is the strongest performer for annual house price growth, at 14.9 per cent, although the average house price there remains way short of its record of £230,931, set in the summer of 2007.

Average house prices in Wales and Scotland hit records in April, at £214,396 and £196,471, respectively.

Six out of nine English regions recorded double-digit annual house price inflation during April.

In the South-West, the average house price broke through the £300,000 barrier for the first time, at £301,632.

Annual house price inflation in London continues to lag behind the rest of the UK, at 6.2 per cent.

However, average property values in London remain much higher than the rest of the UK, with the latest average price of £537,896 also a record for the city, Halifax said.

Nathan Emerson, chief executive of property professionals’ body Propertymark, said their latest housing market report recorded “a rise in new potential registered buyers per member estate agency branch to 84 in March”.

“However, with the recent announcement made by the Bank of England on the increase in interest rates, this will undoubtedly show some effect within the market in the coming months,” he said.

Andrew Montlake, managing director of mortgage broker Coreco, said the house price boom would soon be over, despite the sharp rise in April.

“The stamp duty holiday, record low interest rates and the race for space triggered an unprecedented surge in demand and activity, pushing prices ever higher, but we are now entering the business end of the pandemic,” Mr Montlake said.

With another interest rate increased expected this month, and the potential for more to come, Mark Harris, chief executive of mortgage broker SPF Private Clients, said brokers are being kept busy.

“Borrowers are increasingly concerned about rising mortgage rates and are keen to secure a fixed rate in particular before they rise further,” Mr Harris said.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said they asked people last month as to what extent their monthly mortgage payments would have to rise this year to put their finances under pressure.

She said 10 per cent of respondents said an increase of up to £50 would be enough.

“Once increases started closing in on £100 a month, a third of people said they would face difficulties, and with a rise of up to £200 a month, two thirds said they would struggle. Unfortunately, rises of this size are possible.”