House prices jump by £20K to a new record high

Just in case you thought that house prices would have reached a peak, comes the announcement that they have actually jumped by more than £20,000, or 10.1% during the last year up until March 2016. This is the first time since 2014 that double digit growth has been achieved. It also means that monthly price inflation now stands at 2.6%, with an average price for a home being £212.502 according to Halifax. Other building societies have recorded slightly different figures, but are mostly in agreement about the double-digit peak.

Martin Ellis, economist, said that the house price rise price is due to an ‘acute’ imbalance in the supply and availability for sale of housing, despite recent improvements in the number of properties coming onto the market in the last three months, compared to ten straight months where the numbers fell. This is not something that can be rectified in the short-term.

However, with low interest rates and a healthy labour market, indications are that house price growth will continue to be strong. Martin Ellis also suggests that there is a possibility that prices may, in his words: “Soften in the coming months ahead of the European referendum.”

Alterations to stamp duty mean people interested in buy-to-let or second home purchasers have to pay a 3 % surcharge in the future. This could have a significant effect after April, although it is not likely to have much importance for first time purchasers. It may have inflated the figures prior to the revised duty, as investors have tried to beat the deadline day. In general most advisors feel that post the change, there will be an easing of upward pressure on house prices.

Inflation in the housing market has quite significantly outstripped wage rises, with borrowers affording only because of record low mortgage rates, or making arrangements and extending their loans.

Some experts do feel that a slowdown is coming. Jeremy Leaf, former RICS chairman, said the housing market may have peaked, or be very close to it. However, he does not expect prices to fall by much as the number of first-time buyers in the market remains high at least until the low interest rates change. He also points to the lack of available housing, and higher stamp duty charges.

It is interesting to note that apartment and flat sales are increasing faster than other types of property, on the assumption that people are looking for cheaper alternatives to a complete house.

April is expected to be a more accurate gauge as to the direction and speed of house price change during the next few months. Spring is normally a buoyant time for the property market but with the referendum just a short time away and less buy-to-let investors increasing their portfolios in April, prices may