Annual House Price Inflation at Its Strongest Level in Seven Years
New data published by the Halifax paints a picture of a booming UK housing market, where annual property price growth has reached a new seven-year high. In addition, the average price of a UK home has now reached a record high of £261,743, according to the latest Halifax House Price Index.
“House prices reached another record high in May, with the average property adding more than £3,000 (+1.3%) to its value in the last month alone.,” commented Halifax managing director, Russell Galley.
“A year on from the first easing of national lockdown restrictions, and the gradual reopening of the housing market, annual growth surged to 9.5%, meaning the average UK home has increased in value by more than £22,000 over the past 12 months,”
“Heading into the traditionally busy summer period, market activity continues to be boosted by the government’s stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June’s deadline, after which there will be a phased return to full rates.”
Mr Galley also commented on how savings amassed during lockdown could help movers and first-time buyers with more ambitious property purchases than would otherwise have been possible.
“For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher,” he said.
A Strictly Temporary Trend?
While the momentum the housing market has gained over the past year has been extraordinary, experts continue to point out that the trend will eventually be reversed.
However, Mr Galley believes that the events of the last 12 months will permanently change the preferences and priorities of the UK public.
“Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles – as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing,” he said.
“These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale.”
Fastest Growth in 15 Years
Mr Galley went on to comment on the extraordinary performance on the housing market in key regions of the UK, where prices have been increasing at their fastest rate in over 15 years.
“All UK regions bar the North East saw an acceleration in year-on-year house price inflation last month. The strongest growth was once again recorded in Wales (up 11.9% over the past year), closely followed by the North West and Yorkshire & Humber, both of which posted double-digit annual growth. For Wales and the North West, these are the biggest percentage gains since April 2005, and for Yorkshire & Humber since June 2006,” he said.
“The South of England, traditionally the driving force of national house price performance, is for once lagging somewhat behind the rest of the country. This is especially the case in Greater London, where average prices are still 3.1% higher than a year ago but growing more slowly than the rest of the country. This likely reflects a weakness in city prices given the shift in preference for properties with more space, whilst recent surcharges on stamp duty for non-UK residents and Brexit concerns will also have weighed on the capital’s market.”