House prices in the UK are rising at their fastest pace in nearly 18 years, new figures show.
Annual growth in house prices hit 14.3 per cent this month, up from 12.6 per cent in February, according to figures published by the Nationwide building society.
It is the fastest rate of growth since November 2004 and the eighth consecutive month of price rises. Economists polled by Reuters had forecast a rise of 13.5 per cent.
The average price of a house in the UK rose to a new record of £265,312, representing a rise of £33,000 in the past year. Month-on-month house prices rose 1.1 per cent, from 1.7 per cent in February. Properties are now 21 per cent more expensive than they were before the pandemic hit in early 2020.
The “race for space” continues, with spacious detached properties in rural areas performing better than city apartments. The price of detached houses increased by an average of £68,000, or 22.6 per cent, since the start of the pandemic, but the price of a flat has risen by only £24,000, or 14.1 per cent. The trend is making it more difficult for existing homeowners to “trade up” but many have offset the added costs by moving to a cheaper region, according to experts at Nationwi
In the first three months of this year, growth in property prices was fastest in Wales, at 15.3 per cent in the first three months of the year compared to the same period last year, and weakest in London, at 7.4 per cent. Growth in the capital picked up significantly, however, since the final quarter of last year, when it was 4.2 per cent.
Robert Gardner, chief economist at Nationwide, said the housing market had retained a surprising amount of momentum, given the mounting pressure on household budgets and increase in borrowing costs. The Bank of England raised interest rates for a third consecutive time to return them to the pre-pandemic level of 0.75 per cent earlier this month.
“A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices,” Gardner said. He said the buoyancy in the market was partly down to the strength of the labour market, with unemployment close to historic lows and high wage growth.
He added that the market would cool in the coming months: “The significant savings accrued during lockdowns is also likely to have helped prospective homebuyers raise a deposit . . . Nevertheless, we still think that the housing market is likely to slow in the quarters ahead,” he said. “The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high.”