While the annual rate of growth has moderated slightly over the last six months, the three month rate of growth has been accelerating as low mortgage rates and improving economic outlook support demand.
City prices rose by an average of 6.4% in H1. The fastest growing cities in 2015 H1 have been Oxford (8%), London (6.6%) and Glasgow (6.4%). The weakest growth has been registered in Aberdeen where average prices have been flat.
In H2, Hometrack have predicted the headline rate of growth to gain further momentum towards 10%, as households continue to price low mortgage rates into the market on the back of rising demand, low turnover of stock and prices rising off a low base in regional cities.
The Index cited that the greatest risk on the horizon remains an increase in interest rates, noting that while a year’s worth of new buyers have been subject to tougher affordability tests the majority of mortgagees have not. Over half (57%) of mortgage balances are on variable rates. While this is down from a high of 73% small stepped increases in mortgage rates are likely to impact market sentiment, slow demand and lead to a slowdown in the rate of house price growth.
Jeremy Duncombe, Director, Legal & General Mortgage Club, commented:
“House prices increased well beyond the level of inflation in the first half of the year, despite activity in the market being relatively subdued. The MPC’s recent comments hinting at a rate increase will create a greater sense of urgency among people wanting to own their own home, and this, combined with rising wages and low inflation figures, will drive up demand in the remainder of the year. Banks will also look to price in a rise before one is announced, making it more important than ever for those looking to remortgage to secure a deal before the best rates disappear from the market.
"The opening of the demand flood-gates is likely to drive house price inflation to new highs in the future unless more houses are built to bring balance to the market. The UK housing market needs an extra 250,000 houses to be built per year in order to stem house price inflation and make homes more affordable for aspiring homeowners.”
Ben Thompson, Managing Director, estateagent4me, added:
"Todays figures show there has been a steady rise in UK house prices, with values up by 6.4% on average in the first half of 2015. Although homeowners may celebrate this rise in the value of their home, these increases are significantly above inflation and a sign that the housing market may be overheating.
“Often, the assumption is that house prices are pushed up by those in London. However, these statistics show that areas such as Oxford and Bristol are also seeing big jumps in prices.
“Similarly, our Estate Agent Performance Index found that although properties in London have the highest average price of £499,995, the housing market is moving fastest in Reading and Bristol where estate agents can sell houses in an average of 26 days.
"For the rest of the year, it is likely that areas immediately outside of London will continue to drive house price increases as the cost of living in London forces many to buy outside the Capital."
