UK housing market strengthens with average prices reaching new high

The latest UK housing index shows that the property market remains resilient with prices in the three months to the end of October some 2.3% higher than in the previous three months, the fastest price growth on this measure, since January.

The figures from the Halifax index also show that prices over the three month period were 4.5% higher than in the same period in 2016 and the annual rate of growth at 4.5% was higher than in September and the highest growth rate since February.

On a monthly basis house prices rose by 0.3% between September and October, following a 0.8% increase in September, taking the average price of a home to £225,826, the highest on record and 2.8% higher than in January.

Russell Galley, managing director of the Halifax Community Bank, pointed out that the annual rate of growth has continued to rise for the third month in a row and he suggests that the solid growth is likely to continue.

‘The fact that the supply of new homes and existing properties available for sale remains low, combined with historically low mortgage rates and a high employment rate, continues to support house prices and is likely to do so over the coming months,’ he said.

‘Increasing pressure on household finances and continuing affordability concerns are some of the factors likely to dampen buyer demand. That said we do not anticipate the base rate rise will be a barrier to buying a house,’ he added.

But the strong market is a blow for first time buyers along with the interest rate rise, according to Ishaan Malhi, chief executive officer of online mortgage broker Trussle. ‘Home owners will be pleased to see prices picking up again, particularly those with a small amount of equity in their homes. First time buyers, on the other hand, face a greater challenge of getting on the property ladder. Last week’s base rate rise will mean that some will be no longer able to afford to get a mortgage,’ he explained.

‘We should remember that rates are still incredibly low however. There are still plenty of good mortgage deals on the market. Not all lenders have increased their best rates by the full 0.25%, so anyone looking to buy or remortgage should make sure that they shop around and user a broker who can find them the best deal available,’ he added.

Ged McPartlin, director at Ascend Properties, also pointed out that impact on those saving for their first home. ‘Deposit raising and affordability issues continue to be a barrier for most aspiring home owners, followed closely by a shortage of available properties on the market. The market, particularly in key northern cities like Manchester and Liverpool remains fast moving and demand for both owner occupier and rental stock continues to be high due to their strong economies and desirable prospects,’ he explained.

Russell Quirk, chief executive officer of eMoov, also thinks the strong market will continue. ‘A third month of consecutive price growth seen across a resilient UK market is providing a strong outlook heading towards the end of the year, with a shortage of new builds and affordable property continuing helping to stimulate price growth,’ he said.

‘Although the increase in interest rates may stretch some who have borrowed beyond their means it is unlikely to impact the wider market. The cost of borrowing money remains at an ultra-low level and this, coupled with persistent buyer demand, should see the market continue to gain momentum,’ he added.

Jonathan Hopper, managing director of Garrington Property Finders, believes that most potential buyers will happily walk away from a property they feel is not priced fairly.

‘The only sellers gaining substantial traction are those willing to be realistic in their pricing, and on the front line we’re seeing buyers at all price points become deeply price sensitive. Nevertheless the prospect of further interest rate rises may nudge hesitant buyers into taking the plunge now to lock into a favourable rate,’ he said.

In the months ahead, much will depend on inflation, which is adding more pressure to household budgets at a time of low wage growth, according to Jonathan Samuels, chief executive officer of lender Octane Capital.

‘The more squeezed people feel, the more likely they are to put property purchases on the back burner. In this regard, the performance of the jobs market in 2018 will be critical,’ he said.

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