Based on the latest data, price increases have outpaced the average UK annual salary, although some commentators expect rate hikes to start to cool the pace of growth.
Data from the Office for National Statistics (ONS) shows that average UK house prices hit £283,000 in May after rising more than the median wage for all workers in the UK, which is £31,447, according to the statistics’ latest annual figures Body.
House prices in the UK skyrocketed by £32,000 last year, more than the average wage for workers in the country, new research has found.
Property values rose 12.8 percent annually in May, accelerating from an 11.9 percent rise in April.
That means house prices are rising faster than decades of high broad-based inflation, as measured by the CPI.
Average house prices rose to £302,000 over the year in England, a 13.1 per cent annual increase, while in Wales they rose to £212,000 – up 14.4 per cent.
In Scotland, prices hit £188,000, up 11.2 per cent, and in Northern Ireland they rose to £165,000, up 10.4 per cent.
Within England, the South West was the region with the highest annual house price growth, with average prices up 16.9 percent through May, while London had the lowest annual house price growth at 8.2 percent.
Average house prices in London remain the most expensive of any region in the UK, averaging £526,000 in May.
The ONS also released rental figures showing that residential rents paid by tenants increased 3 percent in the 12 months to June, up from 2.8 percent in the 12 months to May.
Private rental prices rose 2.9 percent in England, 1.9 percent in Wales and 3.5 percent in Scotland in the 12 months to June.
The East Midlands had the highest annual growth in private rental prices at 4.3 per cent, while London had the lowest at 1.7 per cent.
However, the ONS noted that due to the impact of the coronavirus (COVID-19) pandemic on both the number and supply of housing transactions, “larger than usual revisions to published estimates of the UK House Price Index (HPI) may be seen “. .
“Estimates for this month may show increased volatility, particularly at the lower geographic levels where transaction volumes are smaller,” she added.
“We’re looking at ways to improve this, including working with data vendors.”
Jason Tebb, chief executive of property search site OnTheMarket, said rising inventories meant a “subtle market rebalancing was inevitable” but that it would take several months.
James Miles, director of Exeter-based brokerage The Mortgage Quarter, Adding that while the rate of growth in house prices is now cooling, “it’s hard to see prices falling because supply is so low.”
“We’re also still seeing signs that people are looking to move away from big, expensive cities for a better quality of life and more space in rural areas where they can reap the benefits of working from home.
“Even the Bank of England’s interest rate hike will have little impact on house prices for now as most people have fixed interest rates and inventories are critically low.”
However, with interest rates up 0.5 percentage point since May 5 and Bank of England Governor Andrew Bailey reporting that a 50 basis point hike was on the table for August, some believe rising borrowing costs are the reason Housing construction could cool down market soon.
“The era of ultra-cheap money is over and that will soon impact home price growth,” said Andrew Montlake, chief executive of mortgage broker Coreco.
“Increased borrowing costs and the immense pressure on household finances, as seen with inflation at 9.4 percent, will almost certainly dampen demand in the coming months, leading to a slowdown in price growth.
“Of course, the one constant in these times of change is the lack of supply and homes being built; The lack of quality, affordable housing will support prices even as we experience an unprecedented cost of living crisis.”
A key factor in taking out mortgage loans is the interest rates offered by banks, with some brokers saying competition among lenders is currently limited.
Rhys Schofield, managing director of Belper-based Peak Money, said lenders “wouldn’t trip over each other to have the cheapest offer so they don’t get swamped”.
“Santander for example held interest rates a couple of weeks ago which was very admirable but industry rumor says they received 25 per cent of all UK mortgage applications that week and have had a bit of a battle with the level of service since having no lender for that demand ready,” he said.