Murmurs of a slowdown in the property market are yet to materialise as UK house prices climb at their fastest annual rate since June 2007. 

After a slight ebbing in price rises at the start of this year, it seems appetite and activity is back in full force. The latest Halifax figures show that UK house prices have increased by £27,215 over the past 12 months; the largest annual cash rise seen in the bank’s 39-year recording history.

Between January and February, according to the index, monthly house price growth climbed to +0.5%. This brings the average home value up to £278,123. Annually, the incline is +10.8%.

As always, regional variations are in effect, with some areas experiencing a real boom while others lag behind. London remains the weakest performing area for overall growth, although it is on the up. Halifax recorded a 5.4% annual house price inflation in the capital; the strongest seen since the end of 2020.

Will uncertainty rock the boat?

Taking heed of both local and world events, some predict that house price growth will stabilise as uncertainty kicks in. For example, while the lifting of Covid restrictions means many lives return largely to ‘normal’, events in Ukraine coupled with surging oil prices could be a worry.

Russell Galley, managing director of Halifax, comments: “Two years on from the start of the pandemic, average property values have now risen by £38,709 (+16%) since February 2020.

“Over the last 12 months alone house prices have gained on average £27,215. This is the biggest one-year cash rise recorded in over 39 years of index history.”

Galley notes that the ongoing supply issues in the property market continue to impact UK house prices. Research suggests that this could be a particular issue on larger properties, he says, with detached properties seeing the largest percentage price increases at 11% over 12 months.

Wider world issues and UK house prices

“Looking ahead, as Covid moves into an endemic phase and almost all domestic restrictions are removed, geopolitical events expose the UK to new sources of uncertainty. The war in Ukraine is a human tragedy, but is also likely to have effects on confidence, trade and global supply chains.

“Surging oil and gas prices are one immediate consequence, meaning that inflation in the UK – already at a 30-year peak – will remain higher for longer. This will add to the squeeze on already stretched household incomes.”

Adding potential interest rate rises into the mix, as the Bank of England looks likely to implement another base rate rise, this will also affect people’s buying power. Galley concludes that market activity will likely return to “normal levels”, and expects house price growth the ease.

Relocation, relocation, relocation

As a side effect of the pandemic, there are still reports of larger numbers of people migrating across the country. This is having an impact on prices.

Nathan Emerson, chief executive at Propertymark, says: “Estate agents are still reporting bidding wars and buyers who are migrating. Migration means that some buyers can bring with them a larger budget, especially if they are moving away from a city which can filter through to higher purchase prices.

“Many buyers who have lost out are still waiting in the wings. In January, our agents reported registering an average of 100 new potential buyers per branch. Coming into February we have seen an increasing number of valuation appointments.

He adds: “We are hopeful that more sellers will come to the market which will help to ease price rises.”

Robust demand for UK property

Consumer confidence on the whole dipped in February, says Peter Beaumont, chief executive at the Mortgage Lender. While the Halifax index shows that UK house prices remain robust, Beaumont believes the market must work together to ensure those affected by Covid can still buy.

“Despite UK consumer confidence plunging in February, demand for property remains robust,” he says. “However, the market continues to be dictated by supply and demand issues which is subsequently keeping prices on an upward trajectory.

“Households have already encountered financial stresses from the pandemic, particularly those with complex incomes, and many are now facing further pressures from an increased cost of living.”

“There is a real concern that more individuals could be reliant on unsecured debt to get by month to month; our research found that a third (34%) of people planning to buy this year could see their mortgage application rejected by mainstream banks and building societies due to ‘adverse credit histories’.

“For many, experiencing adverse credit could be a one-off blip as a result of financial hardship over the past two years. It’s therefore important the housing market works together to provide alternative solutions for aspiring buyers and not penalise those who may have had an unfortunate slip up in their credit scores.”

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