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House prices jump over £20k in a year to a new record high says Halifax

  • Average house price up by 10.1%, or £21,587, in the year to March
  • Monthly house price inflation stands at 2.6%
  • Average house price hits new record high of £214,811 on Halifax index

Camilla Canocchi for Thisismoney.co.uk

House prices jumped by more than £20,000 in the year to March to a new record high as annual UK house price inflation returned to double-digit growth for the first time in almost two years, according to new figures.

Buyers chasing a low stock of homes for sale sent prices rising by £21,587 or 10.1 per cent in the three months to March, compared to the same period a year ago. The average price is now £214,811, the latest Halifax house price index reveals.  

This is the biggest annual jump since July 2014 and the second biggest since the run-up to the financial crash in September 2007.

In demand: House prices recorded the biggest annual jump at 10.1 per cent since July 2014

In demand: House prices recorded the biggest annual jump at 10.1 per cent since July 2014

Halifax, which uses data only from people who have applied to them for mortgages, said that on a monthly basis house prices surged 2.6 per cent, or £5,477, compared to a 1.5 per cent fall in February.

Martin Ellis, Halifax housing economist, said that property price rises were being driven by an ‘acute’ supply/demand imbalance, despite an improvement in the number of properties coming on to the market for sale in recent months.

It flagged a recent Royal Institution of Chartered Surveyors report, which showed that new instructions by home sellers increased for the third successive month in February following ten monthly falls in a row.

This rise, however, was not sufficient to prevent the stock of secondhand properties for sale falling as sales increased, Halifax said.

‘This, together with continuing low interest rates and a healthy labour market, indicate that house price growth is set to remain robust’, Ellis said – although he added there was a possibility that prices could soften in the coming months ahead of the European referendum.

Uphill struggle: Home buyers face house prices back at record levels compared to wages

Uphill struggle: Home buyers face house prices back at record levels compared to wages

The data comes as last week rival mortgage lender Nationwide reported that buyers of properties to rent and second homes were rushing to beat the April rise in stamp duty. It reported an annual rise in property prices of 5.7 per cent.

Changes to the stamp duty system mean buy-to-let investors and second home buyers must pay a 3 per cent surcharge from this month.

This could see the market slowdown after April, although demand is likely to remain strong from first-time buyers and homemovers.

Howard Archer, chief economist at IHS Global Insight, said: ‘The Halifax data have been markedly stronger and also more volatile than other house price measures, but the Nationwide also reported a marked pick up in house prices in March.

‘This suggests that a recent pick-up in housing market activity by buy-to-let investors and second home buyers looking to beat April’s rise in Stamp Duty has had an upward impact on prices.’

‘Post April, a likely waning of buy-to-let and second home interest may modestly dilute housing market activity and ease upward pressure on prices.’

Rising house prices have pushed Halifax’s house price-to-earnings ratio back to the record highs seen at the height of the 2000s property boom.

Property inflation has substantially outstripped wage rises in recent years, with borrowers only able to stretch to more expensive homes thanks to near record low mortgage rates and extending the term of their loans.

However, optimism for the housing sector seems to outpace broader economic pessimism, according to Halifax.

Jeremy Leaf, a former RICS chairman and north London estate agent, said the housing market may have peaked, or be very close to it.

‘Demand from landlords and second homeowners keen to complete before the April stamp duty hike has now fallen away so it will be interesting to see what April’s house price index reveals’, he said.

‘However, we don’t expect prices to fall by as much as some predict because of the number of first-time buyers in the market taking advantage of low interest rates.’ 

Upbeat: Optimism for the housing sector seems to outpace broader economic pessimism

Upbeat: Optimism for the housing sector seems to outpace broader economic pessimism

He added: ‘The other reason why we don’t expect prices to fall is that at the coalface there is still a general shortage of the sort of property that people want to buy. Although more property is coming onto the market, much of it is aimed at investors who understandably are more reluctant to proceed because of higher stamp duty charges.’

Halifax also found that flat prices have risen more sharply than prices for other property types since 2008, mostly due to the rapid increase in flat prices in London, where they represent a much higher share of the property market here than elsewhere.

Alex Gosling, cheif executive of online estate agents HouseSimple.com, said: ‘The days of double digit price growth have returned – a throwback to pre-credit crunch days. This will only add fuel to the fire that the housing market is starting to lose control.

‘And average house prices hitting another record level will only serve to stoke the fire, although prices bouncing back in March were likely fueled by a glut of buy-to-let investors rushing to beat the Stamp duty deadline, rather than a spiralling market.

‘April will give us a better gauge as to where prices might go over the next few months.’

Gosling said spring is traditionally a buoyant time for the housing market, but added: ‘However, with the referendum just a couple of months away, and fewer buy-to-let investors likely to purchase in April, we might actually start to see prices cooling. That wouldn’t be an altogether bad thing for the market.’ 

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