Housing market remains resilient as price growth hits 18-year high - Halifax

The housing market appears almost as stubborn as now caretaker Prime Minister Boris Johnson as it continues to defy predictions of a slowdown.

The latest Halifax House Price Index shows annual house price growth hit an 18-year high in June.

Average prices rose 13% to £294,845, up 1.8% on a monthly basis.

It reverses four months where house price growth has been slowing.

Russell Galley, managing director of Halifax, said the supply-demand imbalance continues to be the reason house prices are rising so sharply. 

He added: “Demand is still strong – though activity levels have slowed to be in line with pre-Covid averages – while the stock of available properties for sale remains extremely low. 

“Property prices so far appear to have been largely insulated from the cost of living squeeze. This is partly because, right now, the rise in the cost of living is being felt most by people on lower incomes, who are typically less active in buying and selling houses. 

“In contrast, higher earners are likely to be able to use extra funds saved during the pandemic, with latest industry data showing that mortgage lending has increased by the highest amount since last September. 

“Of course, the housing market will not remain immune from the challenging economic environment. But for now it continues to demonstrate – as it has done over the last couple of years – the unique combination of factors impacting prices.

“One of these remains the huge shift in demand towards bigger properties, with average prices for detached houses rising by almost twice the rate of flats over the past year.”

Galley predicted that increased pressure on household budgets from inflation and higher interest rates should eventually weigh more heavily on the housing market, given the impact this has on affordability. 

He said: “Our latest research found that the strong rise in property prices over the last two years, coupled with much slower wage growth, has already pushed the house price to income ratio up to a record level. 

“So while it may come later than previously anticipated, a slowing of house price growth should still be expected in the months ahead.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, echoed observations that excess demand continues to drive activity.

He said: “The number of appraisals and listings is increasing but not fast enough to keep up as sellers try to take advantage of the market peak, or at close to it as possible, but transactions are slowing and lengthening.

“Looking forward, we expect the market won’t be immune to changes in the wider economy and are already seeing signs of a rebalancing but no evidence of major corrections in prices for the time being at least.”

Jonathan Hopper, chief executive of Garrington Property Finders, added: “If Britain is heading for a recession and political limbo, the property market didn’t get the memo.

“Instead of waning, it’s getting white hot again. On an annual basis, house prices are now rising at their fastest pace in almost 18 years. Not since the frothy, pre-crash days of 2007 have prices jumped by as much in one month.

“But behind the breathtaking headline figures, two things are clear. Such a dizzying rate of price growth cannot be sustained. And as the Halifax’s analysis underlines, the market is fragmenting as buyer demand begins to shift.”