UK house prices increased by more than £43,000 during the pandemic, reaching a record high in March as a lack of supply and strong demand boosted prices ahead of an expected slow down linked to rising living costs.
House prices were up 1.4 per cent last month compared with February, representing the fastest pace of growth in six months, according to the mortgage provider Halifax. The average price of a property rose to a record high of £282,753.
Since the first national lockdown in 2020, average house prices have risen by £43,577. In March, the value of a home rose 11 per cent compared with the same month last year, one of the highest rates of growth since 2007.
Russell Galley, managing director at Halifax, said that, although there is some evidence of more homes coming on to the market, “the fundamental issue remains that too many buyers are chasing too few properties”.
Household savings accumulated during the pandemic also helped to boost demand.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that “lenders are still keen to lend and have plenty of cash available to do so, enabling borrowers who are maybe sitting on considerable savings accrued during lockdown to stretch themselves to afford a bigger property”.
Buyers have sought to take advantage of mortgage rates that remain at a historical low despite the Bank of England raising interest rates at its past three meetings.
The South West of England was the UK’s strongest performing region in terms of annual house price inflation, at 14.6 per cent, the highest rate of increase since September 2004.
But house prices in Wales, the South East and Northern Ireland also rose rapidly with double-digit annual rates of growth.
The strength of the housing market largely reflected rising demand for bigger properties in less crowded places that began during the pandemic as more people took up hybrid working.
In contrast, London remained the laggard with an annual growth rate of 5.9 per cent, half the pace of the national average. However, property prices in the capital accelerated compared with previous months. Nicholas Finn, managing director at the estate agency Garrington Property Finders, said this was a “clear indication of buyers’ resurgent interest in city living”.
However, experts expect house price growth to slow in the coming months due to reduced affordability and the rising pressures on household finances.
Jeremy Leaf, a north London estate agency, said that there is still plenty of market resilience “but increasingly stretched affordability is inevitably putting a break on price growth and transaction numbers”.
Separate data from mortgage provider Nationwide showed that the price-to-earnings ratio rose to an all-time high in the first three months of the year.
UK inflation grew at the fastest pace in 30 years and is expected by the Bank of England to reach at least 8 per cent, reflecting higher energy prices following Russia’s invasion of Ukraine.
“Buyers are 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,” said Galley.