UK house prices hit a record of £282,753 in March but are likely to ease over the next year as homebuyers face higher interest rates and the cost of living squeeze, Halifax has said.
The average cost of a home rose by 1.4% on February, according to Halifax’s monthly property index, and is 11% higher than a year ago, about the largest annual increase since the 2007 financial crisis.
The new record is about £28,113 higher than a year ago, not far off the average UK earnings over the same period of £28,860.
March was also the ninth consecutive month that prices have grown, with monthly gains at their highest level since September, when they rose by 1.7%. Average prices have risen by £43,577 since the first coronavirus lockdown in 2020.
The sustained increase has been driven by a shortage of houses for sale and an increase in demand for larger homes linked to the pandemic “race for space”. Hybrid-working trends and more time spent at home prompted many people living in cities to consider relocating to more rural areas.
Russell Galley, Halifax’s managing director, said: “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.”
However, Halifax said the cost of living crisis – with households squeezed by rising energy and food bills – was likely to dampen the increase in house prices over the coming year.
The UK’s annual inflation rate reached 6.2% in February, the highest in three decades, and the Bank of England said that figure could rise to 10% later this year, putting further pressure on living standards.
It is likely to result in higher interest rates, as part of policymakers’ efforts to keep prices in check. The Bank of England had already increased interest rates to pre-pandemic levels of 0.75% last month.
“In the long term, we know the performance of the housing market remains inextricably linked to the health of the wider economy,” Galley said. “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.”
Source: The Guardian