There's been concern for some time that house prices might be rising too excessively, but the latest Halifax House Price Index has revealed that house price inflation is actually slowing down.
On an annual basis, prices in the three months to January increased by 7.3% – a drop from annual growth rates of 7.5% in December and 7.7% in November, meaning it's the second consecutive month that house price inflation has actually fallen.
However, they increased by 1.1% on a monthly basis, with the average price now standing at £175,546 – the first time prices have risen above £175,000 in five years.
There could be upwards pressure on prices for the foreseeable future, largely driven by the lack of new homes coming available for sale, although increased pressure on household budgets should mean prices are constrained to some degree.
Housing economist Martin Ellis commented on the latest Index findings:
"With the supply of properties being slow to respond to more buoyant market conditions, stronger demand has resulted in continued upward pressure on house prices. Demand has increased against a background of low interest rates and higher consumer confidence [while] official schemes, such as Help to Buy, also appear to have boosted housing demand.
"However, continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices."
This should hopefully dampen any fears that prices are rising too rapidly, fears which should be further allayed on the back of the latest IFS report. As reported earlier today, the IFS found that, in real terms – i.e. once inflation has been taken into account – prices are still 25% below their pre-recession peak.
Mortgage rates are still at their rock-bottom levels which should boost optimism even further, ideally getting more people onto the property ladder and encouraging sellers to trade up – which, in turn, could start to balance out the supply/demand issue in the process.
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