The newest installment of the Halifax House Price Index has been released, showing a 9.5% annual growth in house prices.
Prices have risen 1.3% in the past month alone, bringing the average UK house price to £261,743. At the same time, price inflation is at its strongest level in seven years.
Price inflation occurs when demand for particular assets or goods strongly outweighs supply. This is exactly what we’re seeing in today’s housing market where a severe shortage of homes is causing prices to go through the roof.
As prices throughout the UK continue to show strong growth (with a couple of exceptions in and around London), it’s Wales that continues to lead the way with the most prolific price growth, up 11.9% in a year, and no apparent end to the recent hectic market activity. Wales has not enjoyed a market this busy or valuable since 2005.
Wales is so far ahead of the rest of the UK regional markets, that many experts have started using it as a warning system – when things happen in Wales, it’s a matter of time before they spread to the rest of the UK.
Russell Galley, Managing Director, Halifax, said:
“House prices reached another record high in May, with the average property adding more than £3,000 (+1.3%) to its value in the last month alone. A year on from the first easing of national lockdown restrictions, and the gradual reopening of the housing market, annual growth surged to 9.5%, meaning the average UK home has increased in value by more than £22,000 over the past 12 months.
“Heading into the traditionally busy summer period, market activity continues to be boosted by the government’s stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June’s deadline, after which there will be a phased return to full rates. For some homebuyers, lockdown restrictions have also resulted in an unexpected build-up of savings, which can now be deployed to fund bigger deposits for bigger properties, potentially pushing property prices even higher.
“Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles – as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing.
“These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale.”