The average UK house price hit a new record high of £282,753 in March after increasing by nearly the equivalent of average earnings over the past year.
House prices have risen by 18.2 per cent, or £43,577 on average, since the first UK lockdowns around two years ago, according to an index from Halifax.
Property values have increased by 1.4 per cent month on month, or £3,860 on average in cash terms, and were 11 per cent higher than a year earlier.
Russell Galley, managing director of Halifax, said: “The new record price of £282,753 is up some £28,113 on a year ago, not far off average UK earnings over the same period [£28,860].
“The story behind such strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances.
“Although there is some recent evidence of more homes coming on to the market, the fundamental issue remains that too many buyers are chasing too few properties.”
He said that in the long term “we know the performance of the housing market remains inextricably linked to the health of the wider economy”.
He added: “There is no doubt that households face a significant squeeze on real earnings, and the difficulty for policymakers in needing to support the economy yet contain inflation is now even more acute because of the impact of the war in Ukraine.
“Buyers are therefore dealing with the prospect of higher interest rates and a higher cost of living. With affordability metrics already extremely stretched, these factors should lead to a slowdown in house price inflation over the next year.”
The report said the impact of the pandemic on buyer demand can be seen when looking at different property types – with homes offering more space commanding bigger premiums.
Average prices for flats have increased by 10.6 per cent or £15,404 over the past two years.
The average price of a detached property meanwhile has leapt by 21.3 per cent or £77,717 over the same period.
Looking across the UK, the southwest of England has overtaken Wales as the strongest performer in terms of annual price house inflation, Halifax said.
Average house prices in the southwest were up by 14.6 per cent annually in March – the region’s highest rate of annual increase since September 2004. The average house price there was £298,162, marking a record for the region.
While this is the first time since January 2021 that Wales has not recorded the UK’s highest annual growth, house price inflation there remains extremely strong, at 14.1 per cent.
The average house price is £211,942 which is yet another all-time high for Wales, Halifax said.
House prices in Scotland also reached a new record average high of £194,621 although the rate of annual growth continued to slow, falling to 8.2 per cent from 9.3 per cent the previous month.
In the southeast of England, average house prices have risen by £40,177 over the past year. This marks the first time any English region outside London has posted a £40,000-plus rise over just 12 months.
Tom Bill, head of UK residential research at estate agent Knight Frank, said: “We are presumably witnessing the current peak of UK house price growth.
“At some point in the near future the cost of living squeeze and rising mortgage rates will pull prices back down to earth. A shortage of property for sale has been instrumental in driving double-digit price growth, which is another situation that can’t continue indefinitely.
“A strong labor market and high levels of household wealth accumulated during the pandemic means prices will calm down without going into reverse.”
Jason Tebb, chief executive of property search website OnTheMarket.com, said: “We’re seeing an uptick in new homes coming to market, as you’d expect for this time of year, but still not enough to keep pace with demand. ”
Martin Beck, chief economic adviser to the EY Item Club, said: “While mortgage rates have picked up from last summer’s low point, that rise has merely returned rates to the level of a year ago.
“The average interest rate on a new mortgage of 1.6 per cent in February was still well below the 2.2 per cent averaged from 2015 to 2019, making buying look attractive relative to renting.”
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Your home made almost as much money as you did last year.
“But, while homeowners might feel better off on paper, for anyone trying to get on to the ladder, or move up it, this is pushing properties even further out of reach. And right now may not be a sensitive time to stretch yourself.”
Gareth Lewis, commercial director of property lender MT Finance, said: “First-time buyers are being squeezed left, right and centre.”
Here are average house prices in March and the annual increase, according to Halifax:
– East Midlands, £234,083, 12.3 per cent
– eastern England, £330,883, 11.7 per cent
– London, £534,977, 5.9 per cent
– northeast, £162,692, 9.5 per cent
– northwest, £214,591, 10.8 per cent
– Northern Ireland, £177,265, 13.0 per cent
– Scotland, £194,621, 8.2 per cent
– southeast, £385,790, 11.6 per cent
– southwest, £298,162, 14.6 per cent
– Wales, £211,942, 14.1 per cent
– West Midlands, £238,647, 10.0 per cent
– Yorkshire and Humber, £194,639, 9.5 per cent
George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.