House price growth accelerated in February with average price up by £29,000 over the last year
The price of an average house has risen again for the seventh consecutive month in a row according to the latest Nationwide House Price Index (HPI) report. In February, house price growth increased to 12.6% which was up on January’s figure of 11.2% making the price of an average property in February 2022 £260,230. This figure is 20% higher than the average house price in February 2020 and means that the average house has increased by £29,000 in the last 12 months alone. With a limited number of properties available yet a steady stream of buyers, it’s unsurprising that house prices have remained so buoyant but with inflation soon set to rise above 7% and the cost of borrowing beginning to increase, this growth in house prices is likely to slow down dramatically this year according to Nationwide chief economist Robert Gardner.
Commenting on the figures he said: “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% in January, and since borrowing costs have started to move up from all-time lows in recent months.” He adds: “The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.” Gardner suggests that consumers will be feeling this squeeze even more in the coming months with events in Ukraine increasing the possibility that inflation could rise even further and The Bank of England likely to raise interest rates too. He states that: “The economic outlook is particularly uncertain at present. Nevertheless, it is likely that the housing market will slow in the quarters ahead. Housing affordability has already become more stretched, in part because house price growth has been outstripping earnings growth by a wide margin since the pandemic struck. The price of a typical home is now equivalent to 6.7 times average earnings, up from 5.8 in 2019.” Trussle head of mortgage operations, Amanda Aumonier, has similar predictions for the housing market in coming months: “As people take stock of their current financial situation and manage the increased cost of living, this could impact the pipeline of homebuyers, decreasing the demand on property and the likelihood of bidding wars which could, together, halt any further growth in house prices. “The next few months of house price growth will be intrinsically linked to the overall economic picture, with household expenditure likely to put the squeeze onto disposable income, and in turn deposit-saving potential.”