Average UK House Prices Hit New All-Time High in February
Economic uncertainty has become the norm, as the UK continues to deal with the lingering aftereffects of COVID-19. But while some sectors are struggling to get back to pre-pandemic performance levels, others are breaking records left, right and centre.
Once again, average house prices hit a new all-time high in February, exceeding £260,000 for the first time. Data published by Nationwide suggests an astonishing 12.6% average annual growth rate for the month, taking house prices in most key UK regions to new record-highs.
This is the largest year-on-year increase since Nationwide’s monthly index was launched in 1991, suggesting staggering performance for the sector despite the highest level of inflation in over three decades.
On average, the price of a UK home is now approximately £44,000 higher than it was before the pandemic hit – an increase of around 20%.
Supply Continues to Lag Behind Demand
According to Nationwide, issues with available inventory are the main cause of the past year’s record of property price increases. Demand continues to exceed supply in most areas of the UK, with affordable inventory having all-but dried up entirely.
Meanwhile, house price growth continues to outpace wage rises, making it increasingly difficult for the average UK worker to buy their own home.
“The continued buoyancy of the housing market is of little surprise, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months,” commented Nationwide.
“The squeeze on household incomes is set to intensify, with inflation expected to rise above 7% in the coming months,”
“Indeed, there is scope for inflation to rise even further as events in Ukraine threaten to send global energy prices even higher,”
“Assuming that labour market conditions remain strong, the Bank of England is also likely to raise interest rates, which will exert a further drag on the market if this feeds through to mortgage rates,”
A Positive Picture for Current Homeowners
While the housing market is becoming increasingly inaccessible for first-time buyers, all-time record house prices are benefiting millions of existing home owners.
“There has arguably never been a better time to be a homeowner as, despite all that’s been thrown at it, the UK property market continues to go from strength to strength,” said Marc von Grundherr, director of Benham and Reeves.
“This performance really is quite alarming when you consider the wider economic turmoil that we’ve faced for some years now and it proves that there really is no safer investment than bricks and mortar,”
“Even across London where market conditions have remained far more muted, values have continued to climb, and the capital’s property market is now poised to enjoy an accelerated rate of growth over the coming year.”
Further monthly property price increases have been forecast by all major banks and lenders, though at a significantly slower rate than those recorded over the past year.