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House prices in the UK have increased 9.8% in March on an annual basis, with the average property in the UK being valued at £278,000, according to the latest UK house price index data from the Office for National Statistics.

The data found that house prices in the UK have decreased from 11.3% in February this year.

Andrew Montlake comments: “House prices cooled in March relative to February and we can expect more of this throughout the year given the frightening level of inflation. The Stamp Duty holiday, record low interest rates and the race for space triggered an unprecedented surge in demand and activity during the pandemic, but those days are now over.”

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“9% inflation, rising interest rates and a potential recession ahead will impact demand while lenders are becoming ever more cautious, which will restrict what people can borrow. This will almost certainly see the rate of price growth slow during 2022 and into next year. Only the entrenched lack of supply can prevent prices from falling,” Montlake explains.

Average house prices increased over the year in England to £298,000 (9.9%), in Wales to £206,000 (11.7%), in Scotland to £181,000 (8.0%) and in Northern Ireland to £165,000 (10.4%).

London continues to see the lowest annual growth, as average prices increased by 4.8% over the year to March 2022, down from 7.8% in February 2022.

Despite being the region with the lowest annual growth, London’s average house prices remain the most expensive of any region in the UK, with an average price of £524,000 in March 2022.

The North East continued to have the lowest average house price at £155,000.

On a non-seasonally adjusted basis, average house prices in the UK increased by 0.3% between February and March 2022, down from 1.6% during the same period a year earlier.

Average house prices in the UK on a seasonally adjusted basis, increased by 0.6% between February and March 2022, following an increase of 0.9% in the previous month.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Simon McCulloch says: “More properties are coming onto market and selling faster than ever, and at record-breaking prices, yet house prices continue to rise. Even for first-time buyers, our data shows new instructions are up 54% from 2020.”

“However, the rising cost of living, lenders pulling competitive rates, and base rate rises mean many buyers are becoming limited in what they can afford. Ultimately, there’s a clear dichotomy between rising prices, greater supply, and constrained affordability and we’ll see within the coming months if economic pressures test the market’s current trajectory.”

“It is time the analogue conveyancing process was digitised. Whether you’re a lender, buyer, homeowner, solicitor, or estate agent, adopting new technology will help make the transition for all parties involved quicker and more efficient,” McCulloch adds.

Anne Clare Harper explains: “Much like for the wider economy, house price inflation is being driven by shortages of supply. This shortage relates to housing in general, and to quality housing that people can afford, in the places they want and need to live in, in particular.”

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“The shortage of suitable, affordable housing is being made worse by planning backlogs from lockdown alongside labour and material shortages and inflationary pressures, as well as the fact that many new-build schemes are unaffordable to local people. Construction material prices rose by over 20 per cent (including 10 to15 per cent inflation in the first quarter of this year according to The Construction Leadership Council). So, the trend is unlikely to reverse any time soon.”

“The result is an ongoing and growing constraint on the affordability of home ownership. In England, full-time employees could expect to spend 9.1 times their annual earnings on purchasing a home in 2021, and this figure is not improving with the latest HPI data highlighting that house price growth continues to outpace wage growth.”

“This rate of inflation increases the importance of the Private Rental Sector, which is essential for providing safe, quality housing to millions of people and families for whom home ownership is not the right path to follow.”

“This is a major reason why we are seeing growing appetite from investors such as pension funds, which increasingly realise they play a major role in plugging the gap in quality, affordable homes for people and communities across the UK.”

By Becky Bellamy

Source: Mortgage Finance Gazette

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