Average UK house prices exceeded £260,000 ($345,900) for the first time ever in February, climbing at an annual rate of 12.6%, new data has shown.
According to the latest figures from Nationwide’s house price index, the price of an average property in Britain is now £29,162 more than it was a year ago, coming in at £260,230.
This is the largest year-on-year increase recorded in cash terms since the start of the monthly index in 1991, despite inflation soaring to a 30-year high, and higher mortgage rates. It is also around a fifth (20%), or £44,000 higher than prices before the coronavirus pandemic.
January’s rise came in at 11.2% in comparison, while the month-on-month rise in average prices was 1.7%.
Nationwide said the increase was due to a robust demand and limited stock of homes on the market, which put an upward pressure on prices.
However, house price growth has outpaced UK wage rises, meaning affordability has become stretched, Nationwide said. The price of a typical home now sits at about 6.7 times average earnings, up from a ratio of 5.8 in 2019.
“The continued buoyancy of the housing market is little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.
“The squeeze on household incomes is set to intensify, with inflation expected to rise above 7% in the coming months.
“Indeed, there is scope for inflation to rise even further as events in Ukraine threaten to send global energy prices even higher.
“Assuming that labour market conditions remain strong, the Bank of England is also likely to raise interest rates, which will exert a further drag on the market if this feeds through to mortgage rates.”
Marc von Grundherr, director of Benham and Reeves, said: “There’s arguably never been a better time to be a homeowner as, despite all that’s been thrown at it, the UK property market continues to go from strength to strength.
"This performance really is quite alarming when you consider the wider economic turmoil that we’ve faced for some years now and it proves that there really is no safer investment than bricks and mortar.
“Even across London where market conditions have remained far more muted, values have continued to climb and the capital’s property market is now poised to enjoy an accelerated rate of growth over the coming year.”
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