House price growth accelerates to 12.6% in February: Nationwide
House price growth continued to climb in February, pushing average prices up by a further 1.7% against January and £29,000 over the last year, according to this morning's data from Nationwide.
Nationwide say that this rise sees average house prices exceed £260,000 for the first time, piling further pressure on first-time buyers with the price of a typical home now 20% higher than in February 2020.
Robert Gardner, Nationwide's Chief Economist, comments: “Annual house price growth accelerated to 12.6% in February, up from 11.2% in January and the strongest pace since June last year. Prices rose by 1.7% month-on-month, after taking account of seasonal effects, the seventh consecutive monthly increase.
“The price of a typical home rose above £260,000 for the first time in February, an increase of £29,162 over the past 12 months. This is the largest ever annual increase in cash terms since the start of our monthly index in 1991. The price of a typical home is now £44,138 (20%) higher than in February 2020 - the month before the pandemic struck the UK.
“Housing market activity has remained robust in recent months, with mortgage approvals continuing to run above pre-pandemic levels at the start of the year. A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.
“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.
“The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence. Indeed, consumers’ view of the general economic outlook and prospects for their own financial circumstances over the next 12 months have plunged towards levels prevailing at the start of the pandemic.
“The economic outlook is particularly uncertain at present. Nevertheless, it is likely that the housing market will slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise above 7% in the coming months.
“Indeed, there is scope for inflation to rise even further as events in Ukraine threaten to send global energy prices even higher. Assuming that labour market conditions remain strong, the Bank of England is also likely to raise interest rates, which will exert a further drag on the market if this feeds through to mortgage rates.
“Housing affordability has already become more stretched, in part because house price growth has been outstripping earnings growth by a wide margin since the pandemic struck. The price of a typical home is now equivalent to 6.7 times average earnings, up from 5.8 in 2019.”
Tomer Aboody, director of property lender MT Finance, says: "Accelerated house price growth in February demonstrates that buyers are back in the swing of things after the Christmas break.
"Competition among buyers is fierce, with multiple offers being received in many instances. Some vendors are selling before finding somewhere to move to, in order to take advantage of high prices, and opting for rented accommodation until the dust settles.
"With interest rates rising, affordability is becoming even more of an issue, particularly for younger buyers struggling to afford their first home.
"Of course, the terrible war in Ukraine cannot be ignored, and how this might impact the UK. With purses already squeezed as the cost of living rises, the Bank of England might reconsider at its proposed interest rate increases in forthcoming months, in order to minimise the hit on consumers."
Source: www.propertyreporter.co.uk