Annual house price growth at highest level since 2004: Halifax

House prices increased by 1.8% in June, the twelfth consecutive increase and the biggest monthly rise since 2007, according to the latest Halifax house price index.

Related topics:  Finance News
Rozi Jones
7th July 2022
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"The UK housing market defied any expectations of a slowdown, with average property prices up 1.8% in June, the biggest monthly rise since early 2007."

In addition, the annual growth rate of 13% is the highest since late 2004.

Northern Ireland once again topped the table for annual house price inflation, up by 15.2%, equating to an average property price of £187,833.

Wales also continues to record a strong rate of annual growth, up by 14.3%, with an average property cost of £219,281.

Meanwhile the South West saw the highest annual house price growth of any region in England, at 14.2%, where a typical home now costs £308,128.

Scotland too saw an increase in the rate of annual house price inflation, up to 9.9%. A Scottish home now costs an average of £201,549, breaking through £200,000 for the first time in history.

London continues to lag behind other regions in terms of annual house price inflation (+7.1%), though with an average property price of £547,031 it remains by far the most expensive place in the UK to buy a home.

Russell Galley, managing director at Halifax, said: “The UK housing market defied any expectations of a slowdown, with average property prices up 1.8% in June, the biggest monthly rise since early 2007. This means house prices have now risen every month over the last year, and are up by 6.8% or £18,849 in cash terms so far in 2022, pushing the typical UK house price to another record high of £294,845.

“The supply-demand imbalance continues to be the reason house prices are rising so sharply. Demand is still strong – though activity levels have slowed to be in line with pre-Covid averages – while the stock of available properties for sale remains extremely low.

“Property prices so far appear to have been largely insulated from the cost of living squeeze. This is partly because, right now, the rise in the cost of living is being felt most by people on lower incomes, who are typically less active in buying and selling houses. In contrast, higher earners are likely to be able to use extra funds saved during the pandemic, with latest industry data showing that mortgage lending has increased by the highest amount since last September.

“Of course, the housing market will not remain immune from the challenging economic environment. But for now it continues to demonstrate – as it has done over the last couple of years – the unique combination of factors impacting prices. One of these remains the huge shift in demand towards bigger properties, with average prices for detached houses rising by almost twice the rate of flats over the past year (+13.9% vs +7.6%).

“In time though increased pressure on household budgets from inflation and higher interest rates should weigh more heavily on the housing market, given the impact this has on affordability. Our latest research found that the strong rise in property prices over the last two years, coupled with much slower wage growth, has already pushed the house price to income ratio up to a record level.

“So while it may come later than previously anticipated, a slowing of house price growth should still be expected in the months ahead.”

Anna Clare Harper, director of real estate technology platform IMMO, commented: "The reason behind annual house price growth of 13 per cent is simple: supply is insufficient, and new supply is too slow to meet rising demands. This problem is being made worse by uncertainty and volatility, which is making housing seem a relatively safe place to put money. Meanwhile, supply chain challenges include construction material price inflation of 20 per cent-plus and there are ongoing planning backlogs from lockdown. On top of this, relative to house prices, money is still relatively cheap to borrow.

"This supply-demand imbalance - the fundamental problem - will likely be made worse by policy tinkering, such as the proposed extension of the right-to-buy discount scheme for social tenants to those in housing association properties. It seems foolish to encourage further demand when we are not meeting existing market demand.

"What policy makers need to consider is that delivering quality housing to the people who need it, at prices they can afford, is not the same as facilitating home ownership. The impact of public money spent helping to improve the rental sector - either private or social - would be far greater, and far more likely to meet actual housing demands, since what people and families actually need is decent housing in the places they want and need to live, and flexibility for when personal or work needs require them to move."

Jonathan Hopper, CEO of Garrington Property Finders, added: “If Britain is heading for a recession and political limbo, the property market didn’t get the memo.

“Instead of waning, it’s getting white hot again. On an annual basis, house prices are now rising at their fastest pace in almost 18 years. Not since the frothy, pre-crash days of 2007 have prices jumped by as much in one month.

“But behind the breathtaking headline figures, two things are clear. Such a dizzying rate of price growth cannot be sustained. And as the Halifax’s analysis underlines, the market is fragmenting as buyer demand begins to shift.

“Take Southwest England, which at 14.2% is still clocking the fastest average price rises of any English region. Here the once raging demand for coastal properties is finally cooling as buyers seek better value elsewhere.

“We’re seeing this shift in other overheated markets too, as sellers begin having to rein in their most optimistic pricing aspirations and buyers feel their hand strengthen.

“We’ve moved from a market where seemingly all locations and property types were rising to something far more polarised. The Halifax’s data reveals that prices of detached properties are rising twice as fast as the prices of flats, and that affordability has hit a record low – putting home ownership out of reach for more first-time buyers.

“But such strong price growth is no longer the product of a market brimming with confidence. Instead the running is in many cases being made by people’s desperation to find a home before interest rates rise further and the cost of living crisis bites deeper.

“With the UK once again without a housing minister and insufficient homes to meet demand, prices are still lurching higher. But the price momentum can only last so long in the face of rapidly weakening consumer confidence. With millions of Britons simultaneously grappling with surging fuel, energy and food prices, economic gravity will reassert itself in the second half of 2022.”

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