UK house prices seem detached from reality as the annual rate of increase reaches its highest since 2004. That was in the middle of a 'never to be repeated' house price boom. Yet here we are again.
The price of a typical home is now £33,000 higher than it was a year ago, despite increasing pressures on household budgets. Detached houses have led the way, up by £68,000 since the start of the pandemic. Prices are up in all regions.
Nationwide's numbers for March
The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs. The number of mortgages approved for house purchase remained high in February at around 71,000, nearly 10% above pre-pandemic levels. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.
Zoopla/Hometrack's top five cities
Zoopla's numbers run a few weeks behind Nationwide's, so do not reflect the increase in March. What they do show is that price increases are not restricted to rural properties, with the major cities continuing to show strong gains, albeit at a more modest pace. Demand for city properties is now 65% above the 5 year average.
There are two factors boosting demand at present. First is the continued demand for family houses, with the demand for three-bed houses more than twice as high as usual for this time of the year.
Nationwide and Zoopla's indeces are both respected for their accuracy, but look at the road through the rear view mirror. There is every reason to suggest that the current rate of price increase is likely to level off in the near future.
Household budgets are coming under increasing pressure. Inflation is at its highest in decades, energy costs have just seen their sharpest increase ever and the higher National Insurance will be seen in salary slips from the end of this month. Many are likely to be more cautious about property purchase in the coming months.