March saw a monthly house price growth of 1.4%, the biggest increase for six months, according to the latest Halifax House Price Index. While observers have spent months predicting an inevitable slowdown, the average property price has reached another new record high of £282,753.
Stuart Law, CEO of the Assetz Group, said: “Many commentators suggested at the beginning of the year that the market will slow significantly in 2022, after over two years of unprecedented house price growth. I still don’t see that happening and expect significant growth this year, especially for new builds. There are fundamental structural issues restricting housing supply, while the experience of living through the pandemic continues to motivate households to re-evaluate how and where they want to live, creating strong ongoing demand. These underlying dynamics are proving extremely powerful in driving pricing despite soaring living costs and interest rate rises, which many predicted would quickly temper demand and slow price growth.
“This might be great news for sellers and downsizers now, but ongoing price growth at these levels isn’t good for the long-term health of the market. With the cost of living, taxes and interest rates all rising along with house prices, this dynamic is ultimately unsustainable and could lead to a situation where the bubble bursts, while many people become excluded from the market because the costs are so prohibitive.
“The answer to more sustainable price growth is building more homes, quickly. However, housebuilders continue to struggle with a restrictive and costly planning system, while building costs continue to rise as the impacts of Brexit, the pandemic and now the war in Ukraine affect supply chains. With the planning reforms put forward in 2020 reportedly delayed again this month, we are seeing little relief for housebuilders in terms of lowering development costs and unlocking new housing sites. These factors are hugely significant in the context of a market defined by low supply and high prices.
“We need much more support for housebuilders if we are to tackle fundamental issues with the housing market. This includes ambitious planning reform and innovative, bespoke funding solutions to allow companies to better manage their build costs. We will continue to support SME housebuilders, increasing our lending to £1bn this year and £1.5bn next year to try and revitalise the SME sector and unlock new sites across the country.”
Two years on from the first lockdown, house prices have now risen by £43,577. The South West has overtaken Wales as the UK area with strongest house price inflation.
Emma Cox, Director of Real Estate at Shawbrook, said: “The continued impetus of house prices and volume of sales indicates that despite a tough backdrop of rising borrowing costs and lower LTVs, buyers have remained undeterred in an unfavourable and imbalanced landscape. Be that as it may, a correction of sorts is not out of the question as the year progresses, as prices may begin to cool off and fall in line with current inflation and interest rates.
“The property market is crying out for an influx of affordable, quality housing supply which will alleviate demand and help to bring house prices down to a more realistic level, in line with wage growth. It’s also paramount that the green agenda is kept front of mind by landlords, developers, housebuilders, and the government. Building houses quickly is one thing, ensuring that they are energy efficient, affordable and provide a high standard of living for tenants is something else entirely. Supporting landlords and property investors who are building or renovating current housing stock in the PRS must be prioritised ahead of any proposed changes to current energy efficiency regulations.”
However, the cost of living pressure is likely to slow the rate of house price growth this year, Halifax said.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “These numbers are very strong but mostly reflect activity of the past few months. Since then we’ve noticed, on the ground, how rising interest rates, inflation and energy costs in particular, exacerbated by the war in Ukraine, have taken their toll. There is still plenty of market resilience and demand for correctly-priced houses and flats but increasingly stretched affordability is inevitably putting a break on price growth and transaction numbers.”
Nathan Emerson, Propertymark CEO, added: “Our latest Housing Market Report found that the level of housing supply is still 32 per cent lower than before the pandemic and demand is up 134%. “There are no signs that this trend is set to change in the near future meaning the market will continue to remain competitive with homes selling quickly.
“The cost of living crisis and will undoubtedly show its effects in the market in the coming months, with many households facing increasing energy bills, we could also start to see more efficient homes start to hold premiums over older or less efficient homes.”
