UK house prices post biggest jump in six months

The average UK house price hit a new record high of £282,753 in March, according to mortgage lender Halifax.

House prices grew by 1.4% month-on-month in March – or £3,860 on average in cash terms – the biggest rise in six months, the ninth consecutive month of increases and following a 0.8% rise in February.

Property values have risen by 18.2%, or £43,577 on average, since the first UK lockdowns around two years ago.

Halifax said the rise reflected too many buyers chasing too few homes coming to the market, but it warned a growing squeeze on household finances might dampen house price growth in the months ahead.

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Russell Galley, managing director of Halifax, said: “The new record price of £282,753 is up some £28,113 on a year ago, not far off average UK earnings over the same period (£28,860).

“The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances.

“Although there is some recent evidence of more homes coming on to the market, the fundamental issue remains that too many buyers are chasing too few properties.”

He said that in the long-term “we know the performance of the housing market remains inextricably linked to the health of the wider economy”.

He added: “There is no doubt that households face a significant squeeze on real earnings, and the difficulty for policymakers 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.”

The South West of England has overtaken Wales as the UK’s strongest performer in terms of annual price house inflation, now up to 14.6%. The average house price is now £298,162, a record for the region.

The average house price in Wales is now £211,942 which is yet another all-time high for the country.

Property prices in Northern Ireland also continue to be on the rise, with annual growth now at 13%, and an average price of £177,265.

House prices also edged up once more in Scotland, reaching a new record of £194,621.

London itself continued its recent upward trend, with prices now up by 5.9% year-on-year, with an average price of £534,977.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The sizzling pace of house price growth was maintained in March, with the ongoing mismatch between the supply and demand for housing pushing the price of the average property to a new record high.

“The plight of those making a second rung of the property ladder is also important as they are living in homes that many first-time buyers seek to purchase. Runaway property prices have left many of these so-called second steppers struggling to trade up to a bigger home. The demand for more spacious homes, spurred from an increased number of people working from home during pandemic and the advent of flexible working models, have inflated the cost of larger properties.

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“Housing affordability is a growing concern for would-be buyers. It is largely dependent on three factors: house prices, household income and mortgage interest rates. All three have been rising, but the two that reduces affordability (house prices and mortgage rates) combined outstrips growth in household income – the area that increases affordability.

Charlotte Nixon, mortgage expert at Quilter, said the cost of living squeeze should cool the market.

“Since the start of the pandemic house prices have seen considerable growth and the cost of the average UK house is now £43,577 higher than pre-pandemic levels. At present, despite the financial squeeze many are beginning to feel, this growth is continuing to be being propelled by strong demand and too little housing stock,” she said.

“However, the current circumstances are expected to put the brakes on runaway house prices. The situation in Ukraine remains unstable and the cost of living crisis is being felt increasingly by the day, particularly as the energy price cap and national insurance increase have both now come into play. Given the increased financial instability, first time buyers and prospective home movers will likely think twice before embarking on the expensive process of buying a new home.

“What’s more, the Bank of England is expected to increase interest rates further, which will further reduce people’s spending power. Prior to the outbreak of war in Ukraine, inflation was expected to peak at 7.25%, this is now likely to be considerably higher and the only way to combat it is with increased rates. Should this happen, the already dwindling number of cheap mortgage rates will quickly disappear and monthly costs will see a swift increase. Should less people look to move home as a result, the cost of house prices may finally start to see a slowdown.”

Consumer price inflation hit a 30-year high of 6.2% in February and the government's budget watchdog two weeks ago forecast it would go close to 9% in late 2022, contributing to the biggest fall in living standards since at least the 1950s.

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