The cost of an average UK house has topped £260,000 for first time, after surging by nearly £30,000 over the past 12 months.
The typical property value reached £260,230 in February, according to Nationwide Building Society.
In cash terms, the average house price in February was £29,162 higher than a year earlier, which is the biggest annual cash increase the monthly index has recorded in more than 30 years of its existence.
Nationwide added that the price of a typical home is now about 20% higher than it was back in February 2020, just before the lockdowns started. This equates to a cash increase of more than £44,000.
As you will no doubt be aware, the cost of living has also been spiralling in recent months, making homeownership even more unaffordable.
As house price growth has outpaced wage increases, the price of a typical home now sits at about 6.7 times average earnings, up from a ratio of 5.8 in 2019.
Robert Gardner, Nationwide’s chief economist, says: ‘Annual house price growth accelerated to 12.6% in February, up from 11.2% in January and the strongest pace since June last year.
‘Prices rose by 1.7% month-on-month, after taking account of seasonal effects, the seventh consecutive monthly increase.
‘This is the largest ever annual increase in cash terms since the start of our monthly index in 1991.’
Robert added that 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,’ he says.
‘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.
‘The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence.’
He adds that the economic outlook is uncertain, although it is likely that the housing market will slow.
‘The squeeze on household incomes is set to intensify, with inflation expected to rise above 7% in the coming months,’ says Robert.
‘Indeed, there is scope for inflation to rise even further as events in Ukraine threaten to send global energy prices even higher.
‘Assuming that labour market conditions remain strong, the Bank of England is also likely to raise interest rates, which will exert a further drag on the market if this feeds through to mortgage rates.
‘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.’
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