House prices grow at fastest rate for nearly 15 years

House prices have risen 10.8% in a year, the highest rate of annual growth since June 2007, according to the Halifax House Price Index.

The index shows the average UK property is now worth £278,123, with the £27,215 year-on-year growth the biggest rise in cash terms on record. Prices have now risen in eight successive months.

The picture echoes the latest findings from Nationwide’s index published last week, which showed prices in February increased 12.6%.

The increase comes despite a wide expectation that price increases would fall in 2022 due to inflation.

Russell Galley, managing director, Halifax, said “Lack of supply continues to underpin rising house prices, with recent industry surveys showing a dearth of new properties being listed, now a long-term trend. This may be a particular issue at the larger end of the property market.”

Galley said however he expects rising inflation, exacerbated by the war in Ukraine, will likely restrict buyer demand.

He said: “The war in Ukraine is a human tragedy, but is also likely to have effects on confidence, trade and global supply chains. Surging oil and gas prices are one immediate consequence, meaning that inflation in the UK – already at a 30-year peak – will remain higher for longer. This will add to the squeeze on already stretched household incomes. “While increases in bank rate look likely in the near term, the extent of the rises will depend on how it affects prices and companies’ approaches to pay over the months to come. These factors are likely to weigh on buyer demand as the year progresses, with market activity likely to return to more normal levels and an easing of house price growth to be expected.”

Tom Bill, head of UK residential research, Knight Frank, echoed this. He said: “Higher inflation and rising mortgage rates will begin to put the brakes on sky-high demand. It won’t happen overnight but I would expect the return of single-digit house price growth later this year.”