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Average house prices rose 10.8% on an annual basis in April to hit a record £286,079, says the latest Halifax house price index.

This rise is down from 11.1% posted in March, but is still the tenth consecutive monthly rise in prices, the longest run since 2016.

The report says: “The property market has continued to defy expectations in recent times, with the rate of house price growth accelerating since the end of the stamp duty holiday last year.”

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Average house prices have risen by £47,568 over the last two years. It took the previous five and half years to make a similar jump of £47,689 between October 2014 and April 2020, the survey points out.

House prices have fallen in just four months since the start of the pandemic in March 2020. The index adds that the average monthly gain of 0.9% during the past year is more than double the typical monthly increase seen over the previous decade.

However, the report says it expects house prices to slow later this year, as rising inflation and interest rates bite into household budgets.

Yesterday, the Bank of England lifted the base rate by 25 basis points to 1%, the highest level since 2009.

On a regional basis, Northern Ireland has overtaken the South West of England as the UK’s strongest performer in terms of annual price house inflation, now at 14.9%, its highest rate of annual growth since December 2007.

Halifax managing director Russell Galley says: “Housing transactions and mortgage approvals remain above pre-pandemic levels and the continued growth in new buyer enquiries suggests activity will remain heightened in the short-term.

“The imbalance between supply and demand persists, with an insufficient number of new properties coming onto the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices.

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“There remains evidence that this demand is centred on larger, family homes, rather than smaller properties such as flats. Over the past year, prices for detached and semi-detached properties have risen by over 12%, compared to just 7.1% for flats. The net cash increase for detached properties, at just under £50,000 over the past year, is nearly five times more than for flats.

“For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating. Demand in the housing market remains firm and mortgage servicing costs are relatively stable with fixed-rate deals making up around 80% of mortgages on homes across the industry, protecting many households from the effects of rate rises so far.

“However, the headwinds facing the wider economy cannot be ignored. The house price to income ratio is already at its highest ever level, and with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year.”

Lucy Pendleton, a property expert at independent estate agents James Pendleton, says: “This is a housing market with its fingers in its ears, ignoring the gales blowing around it and blithely carrying on.

“With all the economic speedbumps, the threat of inflation topping 10% and a spike in unemployment, it’s amazing how little things have been affected. Yet a tenth successive monthly rise has been notched up and annual growth is still in double digits.

“Appropriately for a market separated from reality, it is detached properties that are seeing the biggest growth, suggesting upsizers are still having to fight hardest over dwindling stock.

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“The ongoing lack of supply and the savings left in some people’s pandemic piggy banks seem enough to fuel new buyer enquiries and keep the show on the road for now. Yet the latest interest rate rise to 1% is only going to make getting a mortgage tougher in the months to come.”

Shaw Financial Services founder Lewis Shaw adds: “April may have been another barnstorming month, but the wheels could come off the property market spectacularly during the second half of the year. Will house prices fall? Probably not, mainly due to the lack of supply.

“Are mortgage lenders starting to show signs of tightening their belts and taking a more cautious approach? Yes. That will temper transaction levels in the months ahead. A lot will depend on the strength of the jobs market and how it holds up under the countless headwinds it faces. But there is a very real risk of recession ahead.”

By Roger Baird

Source: Mortgage Finance Gazette

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