Halifax signals start of house price growth slowdown

The property market is bracing for the start of the slowdown in the rate of house price growth. 

The Halifax House Price Index for April showed average values were up 10.8% annually last month to a record £286,079.

However, while prices rose for the tenth consecutive month by 1.1%, this was down from 1.5% in March and the annual growth rate has slipped from 11% in the previous two months.

Halifax warned that the rate of house price growth is expected to slow as incomes are squeezed.

Over the past year, prices for detached and semi-detached properties have risen by over 12%, compared to just 7.1% for flats, Halifax said.

Russell Galley, managing director of Halifax, said: “For now, at least, despite the current economic uncertainty, the strong increases we’ve seen in house prices show little sign of abating. 

“Demand in the housing market remains firm and mortgage servicing costs are relatively stable with fixed-rate deals making up around 80% of mortgages on homes across the industry, protecting many households from the effects of rate rises so far. 

“However, the headwinds facing the wider economy cannot be ignored. The house price to income ratio is already at its highest ever level, and with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year.” 

Tom Bill, head of UK residential research at Knight Frank, suggested the market has “reached the summit of the recent period of UK house price growth.” 

He said: “We don’t expect prices to fall but we are presumably in the final month or two of double-digit annual growth.  

“The psychological impact of a rising base rate above 1%, higher mortgage rates, a cost-of-living squeeze and the gradual rebuilding of supply will all contribute to the slowdown as house prices come back down to earth later this year.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, added:  “These figures are always an important barometer of market sentiment and show that the concerns of many buyers and sellers about economic uncertainty are still outweighed by their determination to find suitable property.

“Family houses remain the most popular choice for buyers but the continuing shortage of them means that no price correction is anticipated for the time being at least, just a slowing of house price growth.”

However, Jason Tebb, chief executive of OnTheMarket, suggested strong demand will continue to sustain house prices.

He said: “The level of new instructions coming to the market continues to rise slowly, in part due to normal seasonal trends, but there’s still not enough to keep up with demand and this strong competition is driving up prices. 

“A remarkable level of confidence remains in the market, despite considerable headwinds. 

“Buyers who are serious about moving should be decisive or risk missing out on their chosen property, particularly if they want to take advantage of low mortgage rates while they can."