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Boost in house price growth

Boost in house price growth

Category: Mortgages

Updated: 04/02/2016
First Published: 04/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

House prices only ever seem to be on the rise at the moment, and although last year saw tentative signs that house price growth was slowing slightly, it appears that 2016 has given it a new lease of life, with annual growth seeing a definite boost.

The figures, from the latest Halifax House Price Index, show that house prices rose by 9.7% year-on-year in January, and by 1.7% on a monthly basis, putting the price of an average property in the UK at a new record of £212,430. Prices also rose on a quarterly basis – prices in the three months to January were 2.2% higher than in the previous three-month period – and notably, both the quarterly and annual growth rates were the highest seen since October 2015.

Much of these increases have been driven by the ongoing imbalance between supply and demand, said Halifax housing economist Martin Ellis, which continues to "exert significant upward pressure on house prices". He added that the situation looks set to persist over the coming months, and given the state of the housing market at the moment, it's little wonder.

Additional figures from Halifax show that house price optimism remains strong with the majority of people believing that average house prices will be higher in 12 months' time, and housing activity is similarly robust. Home sales rose noticeably towards the end of last year, as did mortgage approvals, but at the same time, supply fell to a fresh low in December, which will put further pressure on house prices in the months to come.

However, Martin pointed out that this may not be the case for much longer, for if prices rise too quickly, affordability will be dramatically affected. Borrowers may be able to benefit from historically low mortgage rates at present but they, too, won't last forever, and if prices become too prohibitive, not even the lowest rate would be able to help.

"Further ahead, increasing affordability issues, as price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease," Martin concluded, which hopefully means that prices won't be pushed to such an extent that homeownership becomes out of reach.

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