House prices in the UK increased by an average of 9.5% over 2015, according to data from Halifax, the country’s biggest mortgage lender. This rise represents the greatest annual growth since 2006 – before the financial crisis.
The latest monthly report from Halifax found that the average house price in the UK rose by 1.7% in December last year, reaching a record high of £208,286.
The yearly growth rate, which is based on a comparison of the three months to the end of December with the same period in the previous year, is the highest for nine years.
Halifax’s data is based on mortgages agreed by the lender during the month and is seasonally adjusted. The bank found that between December 2014 and December 2015, the average cost of buying a home increased by £18,858.
The rise in prices over the year puts the average house price at 5.58 times the typical full-time income of a male worker – the highest level since January 2008.
Property Economist at Capital Economics, Hansen Lu, says prices are “becoming increasingly out of kilter with earnings”.
He adds: “With high prices restraining transaction volumes more and more, we think the market needs to take a breather soon.”
Housing Economist at Halifax, Martin Ellis, says the quarterly growth rate had slowed during the last two months of 2015, “indicating a possible slight softening in the underlying rate of price growth”.
However, he believes a continued shortage of homes for sale will cause further price rises this year.
“There remains, however, a substantial gap between demand and supply, with the latest figures showing a further decline in the number of properties available for sale,” he remarks. “This situation is unlikely to change significantly in the short term, resulting in continuing upward pressure on prices.”1
And the Managing Director of Garrington Property Finders, Jonathan Hopper, reports that 2015 ended much as it began, with demand for property surpassing supply in many areas.
He says: “If the start of 2015 was hampered by caution as some sectors of the market paused to wait out the election, there are no such reservations this January.
“With interest rates set to stay low for some time and buyer confidence strong, demand continues to surge.”1
The Halifax index was the most unpredictable of the major price trackers in 2015, with monthly changes in the market ranging from decreases of up to 0.4% and an increase of 2.7%. Meanwhile, its annual increase is more than double the 4.5% reported by Nationwide.
Lu suspects that the strength of Halifax’s figures “reflects a degree of catch-up”1, as over the longer term it is in line with other indices. He adds that any changes in mortgage lending by the bank could have also been a factor.
This week, it was reported that the Government plans to build 13,000 new homes across the South East (https://landlordnews.co.uk/17473-2/), but experts warn that more is needed to curb price growth.
The Director of Legal & General Mortgage Club, Jeremy Duncombe, states: “Today’s figures from the Halifax show house prices continued to rise in December, ending a year that has seen house prices steadily increase well above inflation and wage growth.
“Without a strong house building programme from the Government, this trend will continue well into 2016, making homeownership harder to achieve for many.”1