Average UK House Prices See Highest Annual Growth in 14 years
With the UK real estate market returning to full strength after almost a year spent in lockdown, average property prices are soaring at a rate even the most optimistic analysts could not have predicted. According to the latest figures from the Office for National Statistics, house price averages skyrocketed by 10.2% in March compared to the same month last year.
This equates to an average price increase of around £24,000 – the highest year-on-year growth rate in 14 years. The ONS figures also suggest that the average asking price for a property in the UK is now £256,000, a new all-time record.
However, many experts now believe that the market is at risk of overheating, as its current momentum simply cannot be sustained long-term.
“We’re back to the kind of double-figure house price rises we saw in the heady days before the financial crisis of 2008” warned Hargreaves Lansdown analyst Sarah Coles.
“And while lenders are far more cautious than they were back in 2007, in this kind of market, there’s still the risk buyers will lose their heads, and make a property mistake that could haunt them for years.”
Escalating Generational Inequalities
News of the UKs highest ever average property prices come shortly after the governments’ introduction of a new scheme to motivate High Street lenders to offer more 95% LTV mortgages. In an effort to encourage as many first-time buyers as possible to get on the property ladder, 5% deposit mortgages have once again been introduced by some of the biggest banks and lenders in the UK.
The prospect of a low deposit is unlikely to compensate for the prospect of insurmountable property prices in most key locations. Commenting on behalf of asset manager SPI Capital, chief executive Anna Clare Harper said that the sad reality of the current situation would be comparatively few people being able to afford property purchases.
“The effects are clear: with wages rising significantly more slowly than house prices, affordability constraints are increasing,” she said.
“This is creating huge inequalities between older and younger generations, and growing demand from both younger and older renters who are priced out,”
“For first-time buyers, this is a hideous market. With average prices up £24,000 in a year, saving a 10% deposit needs £2,400 extra in savings.”
Commenting on the sectors performance, the report published by the ONS indicated that tax breaks introduced during the lockdown had positively influenced purchase decisions and transaction volumes.
“Changes in the tax paid on housing transactions may have allowed sellers to request higher prices as the buyers’ overall costs are reduced,” the ONS commented.
The stamp duty holiday that was due to expire in March was recently extended until later in the year, which many believe will continue to drive strong performance for the sector throughout much of the summer.