According to Halifax’s latest house price index, this is the first time average house prices have exceeded £270,000 in its reporting and it is the fourth consecutive month of price rises this year.
Average house prices in the UK are now pegged at £270,027, which is up 0.9 per cent month-on-month and up 8.1 per cent year-on-year. The report said this was the highest annual increase since June.
The results mirror Nationwide’s house price index, which came out earlier this week and showed that house prices had breached £250,00 for the first time in its reporting.
Halifax’s managing director Russell Galley said the key drivers of growth over the past 18 months had been the race for space as buyers sought bigger properties away from the city, along with measures like the stamp duty holiday.
He added added that since April last year, average property prices had grown by around £31,516, an increase of 13.2 per cent.
Wales reported the strongest growth with an annual house price change of 12.9 per cent, bringing average house prices to £198,880.
This was followed by Northern Ireland with 11.3 per cent annual change, which brought average house prices to £169,308. North West’s annual change was pegged at 10.4 per cent, with average house prices coming to £205,881 and was England’s top performing region.
Scotland also reported 8.6 per cent annual house price change, with average house prices coming to £190,023.
London was the weakest performing region with annual inflation of 0.8 per cent, compared to an increase of one per cent in September. This is the lowest year-on-year rise since February last year.
Galley said: “More generally the performance of the economy continues to provide a benign backdrop to housing market activity. The labour market has outperformed expectations through to the end of furlough, with the number of vacancies high and rising relative to the numbers of unemployed.”
First-time buyer house price growth hits five-month high
The report also noted that first-time buyer annual house price inflation came to 9.2 per cent, which was a five-month high. This was attributed to parental deposits, improved mortgage access and low borrowing costs.
Mark Harris, chief executive of SPF Private Clients, said: “The return of first-time buyers to the market, helped by high loan to value mortgages and the help of the Bank of Mum and Dad is welcome, as they are the lifeblood of the market.
“However, with first-time buyer annual price inflation higher than that of movers, one wonders how long they can keep up with rising prices.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, added that first-time buyers must have “breathed a sigh of relief” yesterday following the Bank of England’s decision to hold the base rate at 0.1 per cent.
He said: “This is only likely to prove to be a temporary reprieve as a rate rise seems inevitable. Looking forward, we expect not much change with more demand for houses than flats, masking larger differences in percentage changes.”
Bank of England base rate impacting activity
In its base rate decision yesterday, the Monetary Policy Committee said an increase could be expected in the coming months.
Malley said: “With the Bank of England expected to react to building inflation risks by raising rates as soon as next month, and further such rises predicted over the next 12 months, we do expect house buying demand to cool in the months ahead as borrowing costs increase.”
He added that despite potential base rate increases borrowing costs would be low by historical standards and raising a deposit would still be the primary obstacle for many. He added property prices would be tempered by limited property supply.
Harris added: “The Bank of England’s decision to hold interest rates this month caught the markets out, as they had factored in a rate rise this time around, as well as a couple more by the end of next year.
“Lenders have already been raising their cheapest mortgage rates in response, with very few products available at less than one per cent. We have been asked if they will backtrack on these increases since the official rate did not rise but we are unlikely to see rates that cheap again.”
He added: “That said, while borrowers have had a short reprieve, with increases set to come at some point, rates remain low and continue to support property prices, along with the lack of stock.”
Tomer Aboody, director of property lender MT Finance, said: “While the Bank of England will try to manage inflation by finally increasing interest rates in the next few months, rates will remain low compared to previous years.
“More supply is needed in order to manage the price increases and keep them in check. Removing or reducing downsizers’ stamp duty, to allow more homes to come on the market, could be one solution the government should consider.”