Almost everywhere the country has seen strong house price growth in the last few years, especially so after the first lockdown where there was more unspent household cash and a reduction in stamp duty offered by the treasury. It fuelled a frenzy that exceeded the 1988 rush to beat the tax reduction involving MIRAS (mortgage interest relief at source). That ended with a collapse of house prices as the then chancellor, Nigel Lawson completely miscalculated the effects of his budget statement giving at least six months for housebuyers to go for it.
Every month for the last year, annual house price growth has climbed. It’s been a long stretch of year-on-year house price rises.
In London, the annual rate of growth in asking prices has increased every month since April 2021. This means the marketed price of a London home is 6.3 per cent higher this March than 12 months ago, taking the average house price to £664,400. From February 2021 to February 2022, the increase was as much as 7.3 per cent, up from 4.2 per cent from January to January.
The last time the capital recorded a sustained stretch of uninterrupted growth was from September 2009 to February 2017, according to the latest Asking Prices Index from Rightmove.
For the rest of the country, things were pretty much the same.
Annual house price growth in the UK as a whole also grew strongly. That hit 12.6 per cent in February, despite rising mortgage rates, pushing the UK’s average house price over £260,000 for the first time. Last month’s rise of the Nationwide House Price Index was the biggest since June last year and up from the 11.2 per cent jump in January, which was the strongest start to the year since 2005. The increase pushed the average nominal house price to £260,230, the highest since comparable data first began in 1952. This was up £29,162 on February 2021 — the largest year-on-year increase recorded by the lender — compared to average earnings for full-time employees last year of £31,285.
How likely is it that house prices will keep rising? This is a question that has defied even the most experienced of economists. Generally speaking, the money is on slowing house-price growth as we head towards the winter.
The reality is that the cost of living crisis will surely mean household spending is squeezed and therefore, moving home does not become a priority. Fewer transactions mean less activity – and therefore market forces play a hand in house prices. In addition, many foreign investors are going to be a little more wary of throwing cash at what was a safe haven until Russia decided to invade Ukraine – and sanctions became fashionable for Western governments. Tax havens and new transparency rules will no doubt have an effect as well. On top of that, taxes are increasing and so are interest rates, which means house prices are unlikely to keep climbing from next year.
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