House prices hit new record but growth expected to slow

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

Halifax said the average property value rose by 1.1% 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.”

The typical house price was a new record of £286,079 – an annual increase of 10.8%.

At the current rate of growth, the price of a typical home could hit £300,000 by the end of the year, but Halifax said that remains unlikely given the economic conditions predicted.

Prices have increased by £47,568 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.

Mr Galley said: “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.

“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%, compared to just 7.1% 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 10%-plus in the coming months and the Bank of England raised the base rate to 1% this week, pushing up costs for some borrowers.

Mr Galley continued: “The headwinds facing the wider economy cannot be ignored.

“The house price-to-income ratio is already at its highest ever 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.”

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

Average house prices in Wales and Scotland hit new 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 the rest of the UK, at 6.2%.

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 new record for the city, Halifax said.

Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Our latest housing market report records 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.”

Andrew Montlake, managing director of mortgage broker Coreco, said: “Even though prices rose sharply again in April, the house price boom will soon be over.

“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’re now entering the business end of the pandemic.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “With another interest rate rise this month, and the potential for more to come, 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.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Last month we asked people how much their monthly mortgage payments would have to rise this year in order to put their finances under pressure, and 10% of people said up to £50 would be enough.

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

Here are average house prices in April followed by the annual increase, according to Halifax:

– East Midlands, £237,466, 12.8%
– Eastern England, £334,570, 11.9%
– London, £537,896, 6.2%
– North East, £163,431, 8.9%
– North West, £217,199, 10.7%
– Northern Ireland, £182,565, 14.9%
– Scotland, £196,471, 8.3%
– South East, £390,095, 12.1%
– South West, £301,632, 14.8%
– Wales, £214,396, 14.2%
– West Midlands, £241,632, 10.4%
– Yorkshire and the Humber, £197,955, 10.3%