No let up in house price rises as new records set

House prices continued to boom in April, surpassing the record high set the month before, the Halifax house price index revealed. The average property will now set you back £258,204, a 1.4% increase month-on-month and 8.2% year-on-year. It is the highest annual growth rate in five years, with almost £20,000 being added to the value of the average house since April 2020.

Though the stamp duty holiday “continues to add impetus” to an already overheated market, its influence will gradually fade as it is tapered out over the next few months (it comes to an end at the end of June), says Russell Galley, managing director at Halifax. But low stock levels, low interest rates and relentless demand are likely to continue driving prices higher. And the £20,000 increase in house prices over the last year means the potential savings on stamp duty might not outweigh the inflated price of a new house, points out Iain McKenzie, CEO of The Guild of Property Professionals.

UK house prices

HMRC monthly property transactions increased to their highest level ever in March 2021 – there were 190,980 transactions in March 2021, up by 32.2% from February. Transactions for the latest quarter were around 31.2% higher than the quarter before, and year-on-year there was a 102.4% increase from March 2020. 

So why is this happening? The factors mentioned above – low interest rates, low stock, and increased demand – play a a huge part. There’s also the fact that those in a position to buy a home have been saving since the start of the pandemic. Data from the Office for Budget Responsibility revealed last month that Britons are estimated to have saved an extra £180bn since the start of the pandemic, so those in the market for a house will have more to spend, which then inevitably drives prices up as buyers get caught in bidding wars that could push the price of a property even higher.

Rob Gill, managing director if independent mortgage broker Altura Mortgage Finance, attributes a lot of it to “deep-seated FOMO” – fear of missing out. There is “a fear among buyers that they could ‘miss out’ if they don’t hurry up and buy before prices spiral beyond reach. As prices accelerate, it's certainly tempting to forecast it will all end in tears. However, history suggests that low interest rates, Government support and an improving economy are classic ingredients for house prices to carry on rising rather than crash.” 

Halifax says house price growth will begin to slow towards the end of the year due to the potential for higher unemployment after the furlough scheme ends. There is also the potential return of people to cities as things begin to reopen, who might be looking at renting rather than buying. For now, however, the boom continues.