House prices have rocketed 20 per cent in the two years since the coronavirus pandemic began and the average home is up £29,000 over the past year alone, figures revealed today.
Britain’s biggest building society Nationwide said the pandemic property boom continues apace, with the average house price rising almost another £5,000 or 1.7 per cent last month to breach £260,000 for the first time.
House price inflation climbed to 12.6 per cent in February, with the average home costing £260,320 – £44,138 higher than in February 2020.
Up and away: House prices dipped slightly as the pandemic hit and then soared as a boom took hold, Nationwide’s index shows
After a brief fall after the initial Covid lockdown arrived in the UK in March 2020 and the property market frozen until later than spring, house prices then began to surge later that year.
This has created a fresh affordability crisis in the UK’s property market, driving the cost of a home relative to wages up from already elevated levels to the highs seen just before the financial crisis.
Analysts expect the cost of living crisis to crimp the market, but the crunch for household budgets has failed to make much of a dent yet.
Nationwide’s chief economist, Robert Gardner, said: ‘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 per cent 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.’
Inflation pain: The pandemic boom has delivered an affordability crisis, with house prices rising to record levels compared to wages – similar to just before the financial crisis
An acute shortage of homes being listed for sale is said to be behind the price increases, as this increases competition for those which do become available.
On average there are currently 19 homes for sale per estate agency office compared to an average of 552 registered house hunters, according to Propertymark, the membership body for estate agents.
This means that a typical estate agent has 29 potential buyers for every available property.
Jonathan Hopper, CEO of Garrington Property Finders, said: ‘Competition remains extremely stiff for homes in the most desirable areas.
‘The most sought-after properties are selling in days, if not hours, and some sellers are still subjecting would-be buyers to a beauty pageant, dispensing with the usual niceties of offers and counteroffers, and instead jumping straight to “best and finals”. This means many buyers are still having to be very tactical.’
But despite the record growth, some experts predict that rising interest rates and the increasing cost of living could dampen house price rises in months to come.
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, said: ‘The Herculean performance of the property market in February is being driven by still rampant demand and an unprecedented lack of homes for sale.
‘Don’t expect this pace of growth to continue, though, as there are countless headwinds ahead.
‘Interest rates are set to rise further to contain spiralling inflation, tax hikes are getting ever closer and energy and grocery bills are skyrocketing.
‘Moving forward, it’s likely that people’s borrowing power will wane as lenders take into account these extra costs and that will cause the market to cool down.’
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.