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  • Writer's pictureInvestment Synergy Team

House prices rise at fastest pace since 2004 as UK property market defies expectations

Property price inflation hits 13% as higher-income buyers spend savings built up during pandemic

House prices surged over the past year at the fastest pace since 2004 as the UK property market continued to defy expectations of a slump.

House price inflation hit 13 per cent in the past 12 months, taking the average price of a home to a new record high of £294,845, Halifax bank reported. In June alone, prices rose 1.8 per cent, the fastest monthly increase since 2007.

The rapid increase in property prices comes despite rising interest rates, and will add to fears that homes are becoming increasingly unaffordable in many parts of the country.

Halifax recorded price rises in every part of the UK with Northern Ireland showing the most significant inflation. The average price of a home rose 15.2 per cent over the year, ahead of Wales which saw prices jump 14.3 per cent.

In England, the South West registered the biggest increase at 14.2 per cent. In Scotland, the average house price passed the £200,000 mark for the first time.

Halifax said it expected price growth to slow in the months ahead.

Russell Galley, managing director, Halifax, said: "The UK housing market defied any expectations of a slowdown, with average property prices up 1.8% in June, the biggest monthly rise since early 2007.

"This means house prices have now risen every month over the last year, and are up by 6.8 per cent or £18,849 in cash terms so far in 2022, pushing the typical UK house price to another record high of £294,845.

"The supply-demand imbalance continues to be the reason house prices are rising so sharply.

"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 (13.9 per cent versus 7.6 per cent).

"In time though, increased pressure on household budgets from inflation and higher interest rates should weigh more heavily on the housing market, given the impact this has on affordability."

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

Here are the average house prices in June and the annual increase, according to Halifax:

- East Midlands, £241,875, 12.6%

- Eastern England, £341,544, 12.4%

- London, £547,031, 7.1%

- North East, £169,760, 11.0%

- North West, £224,941, 12.0%

- Northern Ireland, £187,833, 15.2%

- Scotland, £201,549, 9.9%

- South East, £396,173, 11.9%

- South West, £308,128, 14.2%

- Wales, £219,281, 14.3%

- West Midlands, £247,130, 11.5%

- Yorkshire and the Humber, £203,630, 10.3%

Investment Synergy - a slow down maybe, but ..... let‘s hope it’s a slow deflation rather than a large bubble bursting !

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