Wait! What’s a House Price Index?
It’s not as complicated as it looks at first glance! A ‘House Price Index’ (or HPI) is a set of numbers that shows how property values have risen or fallen. Different HPIs are released by property portals like Rightmove, the government, or big mortgage lenders – basically, all the people who know the most about house prices. Most HPIs, like the ones released by Nationwide and Halifax, are updated every month and contain market predictions too.
House prices are 14.3% higher than last year
Compared to March 2021, the average price of a property in the UK has risen by 14.3%. Last month the year-to-year rise was (a still very healthy) 12.6%, which means that the rise in property prices is accelerating. It’s the eighth monthly increase in a row, and so far it shows no signs of stopping.
To put that in perspective, the average home has gained £5,082 in just one month.
This is good news for homeowners who naturally want the value of their home to rise, but does of course make things trickier for first time buyers, who are likely to be able to afford a smaller property than they would just a few years – or even one year – ago. In fact, the average flat is now £24,000 more expensive than this time last year.
All in all, it’s been (another) record-breaking month, with the strongest pace of increase since November 2004.
Wales is winning, and growth in London is slowest
Just as in previous months, house prices in Wales have grown faster than in the rest of the UK. In England, Yorkshire and the Humber is the best performer, with prices having risen 13.5% compared to the same time last year.
And just like last month, London is the worst performer when it comes to house price acceleration, although this is hardly a bad thing – prices have still grown in the first part of 2022, albeit a little more slowly.
The cost of living crisis hasn’t left a mark (yet), and this is why
The upward growth in house prices has surprised some, particularly given the rise in general household costs. Robert Gardner, Nationwide’s Chief Economist, gives three possible reasons for this:
1) Robust demand and limited stock has kept upward pressure on prices.
2) The UK is experience strong labour market conditions. This is because the unemployment rate has fallen in recent months (decreasing to 3.9% in the three months to January) from already low levels. Wages are also growing (although they’re still below inflation).
3) Lockdown savings are still helping prospective buyers raise a deposit. Gardner estimates that households accrued an extra c£190bn of deposits since early 2020 due to the impact of Covid on spending patterns, which comes to around £6,500 per household. (Gardner also notes that these savings are not evenly spread, with older and wealthier households seeing more benefit.)
Expert predictions for the rest of 2022
Although property prices are still rising, and they’re unlikely to stop going up any time soon, most experts think the speed at which they rise will decrease. Gardner says:
“…we still think that the housing market is likely to slow in the quarters ahead. The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high. Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.”
Yopa’s Chief Analyst Mike Scott adds:
“There was some expectation of a slowdown in the rate of growth of house prices this year, but it is clear that this has not yet happened. The combination of restricted supply, high demand and interest rates that remain at historically low levels despite the recent base rate increase is continuing to push prices higher. Yopa does expect that the rate of growth will slow down in the second half of the year, as interest rates rise further and cost of living increases start to bite. However we do not anticipate that the market will turn around completely, with prices starting to fall, since it will take more than one year to rebuild the stock of homes for sale to a more normal level.”
Retrieved from：https://www.yopa.co.uk/blog/house-price-news-the-average-home-gains-5082-in-one-month (7 April, 2022)
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