Housing market surprises with another record

Despite the rising cost of living and increases in mortgage rates, average house prices across the UK hit another new record last month, according to the latest index from the Halifax.

Housing market surprises with another record
Although most analysts expect a slowdown or even a reversal in the market in the coming months, the mortgage lender's June report said a shortage of properties on the market and a continuing demand for larger, detached homes had led to the latest price rise.

The Halifax calculated the average house price at £294,845 last month, 1.8% higher than in May, representing the largest month-on-month increase in 15 years.

Russell Galley, Halifax managing director, said that, until now, the housing market had been largely insulated from the rising cost of living.

"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," he said.

"In contrast, higher earners are likely to be able to use extra funds saved during the pandemic."

Once again, the largest, annual percentage price increase was recorded in Northern Ireland where the average last month stood at £187,833, representing a year-on-year rise of 15.2%.

Wales continued to see strong annual growth, up by 14.3% and boosting average property costs to £219,281, while Scotland's 9.9% jump pushed its average to £201,549 - the first time it had passed the £200,000 mark.

In England, the highest annual house price growth was the 14.2% recorded in the South West, pushing average prices to £308,128. London saw the lowest rate of increase (7.1 per cent) although, with an average price of £547,031, it remained by far the most expensive place in the UK to buy a home.

Martin Beck, chief economic adviser to the EY Item Club, felt that property inflation had to "run out of steam soon" but that house prices were unlikely to fall.

"A significant, 1.8% monthly increase in the Halifax measure of house prices in June was well above expectations," he said. "June’s increase pushed up annual price growth to 13 per cent, the highest since late 2004.

"While still-rapid growth in house prices is bad news for first-time buyers, the boost to home-owners’ wealth and sentiment from rising prices might offer some useful support to consumer spending amid cost of living pressures.

"Given increasingly stretched affordability and rising mortgage rates, the EY Item Club believes house price inflation must surely run out of steam soon. But cost of living pressures are being borne disproportionately by low-income, primarily renting households, not better-off home owners. And low unemployment will reduce the risk of forced selling. So house prices are far more likely to see slower growth than a decline."

Jeremy Leaf, a London estate agent and a former Royal Institution of Chartered Surveyors' residential chairman, added: "Despite concerns over the rising cost of living and interest rates, the excess demand over supply continues to hold sway and is driving activity.

"The number of appraisals and listings is increasing but not fast enough to keep up as sellers try to take advantage of the market peak, or at close to it as possible, but transactions are slowing and lengthening.

"Looking forward, we expect the market won’t be immune to changes in the wider economy and are already seeing signs of a rebalancing but no evidence of major corrections in prices for the time being at least."

Read more news and views from David Sapsted, July articles.

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