House Prices Rise at Fastest Rate in 15 Years, but Slowdown ‘Is Coming’

House prices rose at their fastest pace since 2007 to reach a record high last month, according to research by Britain’s biggest mortgage lender.

Prices rose by 10.8 per cent in the year to February after slower growth in January. Houses were also about 0.5 per cent, or £1,478, more expensive last month than they were in January. The average house price set yet another record at £278,123, after eight consecutive monthly increases recorded by the Halifax index.

The stamp duty holiday, which offered prospective buyers savings of up to £15,000 for purchases made before September 30 last year, brought forward demand and pushed up the average price of a property in the UK to £276,091 last year. The average price rose by £27,215 in cash terms in the year to February, marking the biggest such rise since the index began 39 years ago.

The squeeze on household budgets is expected to weaken demand for houses and lead to price drops later this year.

Russell Galley, managing director at Halifax, said that a lack of supply of homes on the market had driven the rise in prices. “This may be a particular issue at the larger end of the property market,” he said. “Over the past year the average price of detached properties has risen at a rate more than four times that of flats in cash terms.”

He added: “Looking ahead, as Covid moves into an endemic phase and almost all domestic restrictions are removed, geopolitical events expose the UK to new sources of uncertainty.

“The war in Ukraine is a human tragedy, but is also likely to have effects on confidence, trade and global supply chains.”

The fastest growth was recorded in Wales, where prices rose by 13.8 per cent in the year to February. However, the average price of a house in Wales remains significantly below the UK average, at £207,184.

House prices rose by 13.4 per cent in the southwest of England, which showed the strongest growth in the last quarter. The average house price there is £293,968.

London once again showed the weakest growth, with inflation in house prices at 5.4 per cent. The capital has been particularly hard hit by the departure of migrants since Brexit rules came into effect at the beginning of last year, and the rise in remote and hybrid working, which allows people to live further away from their offices.

Price growth in the capital is growing, however, with February figures reflecting its highest inflation rate since the end of 2020.

Andrew Burrell, chief property economist at the Capital Economics consultancy, said that low mortgage rates, high levels of household savings and the boost to housing demand from new remote working arrangements would contribute to inflation in house prices in the coming months.

However, price growth will slow down in the second half of the year, he predicted.

“With policy tightening, mortgage rates are set to rise, while other pressures on household incomes are likely to weigh on demand later this year,” Burrell said. “In our view, house price growth will stay strong until the summer, but will slow to 5 per cent [year-on-year] by the fourth quarter of 2022, albeit that this is stronger than most expect.”

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House prices rise at fastest rate in 15 years, but slowdown ‘is coming’