Halifax Price Index: stock shortages driving inflation

Halifax’s latest Price Index for November affirms recent industry reports around rising house prices and stock shortages.   

The report reveals that house prices have risen for a fifth straight month, with growth now at a 15-year high taking the average UK property price to a record £272,992. Quarterly house price inflation is now at its strongest level since late 2006.

The performance of the market continues to be underpinned by a shortage of available properties, a strong labour market and keen competition amongst mortgage providers keeping rates close to historic lows.

First time buyers are playing an important role in driving activity, the report finds, although annual house price inflation for first-time buyers stands at 9.1% compared to 8.8% for homemovers.

Different property types are also experiencing different rates of growth too. The report shows that flats are now outstripping larger properties with an average 10.8% annual price inflation compared  to 6.6%, suggesting that the “race for space” is becoming less prominent than it was earlier in the pandemic.

But looking ahead, forecasted rises in inflation that could “comfortably exceed” 5% next spring according to Ben Broadbent, the Bank of England’s deputy governor, suggest that the 2022 property market may be heading in to a period of uncertainty. Experts predict that an uplift in interest rates to offset inflation will impact homebuyer appetites where mortgage approvals are concerned.

Analysis by Sirius Property Finance suggests that the level of monthly mortgage approvals are set to dip by 20% due to rising rates and inflation. Head of Corporate Partnerships at Sirius Property Finance, Kimberley Gates, commented:

We’ve seen a sustained period of record low interest rates help drive market activity for quite some time now and so it’s only natural that any uplift is likely to reduce homebuyer appetites due to the greater cost of borrowing. 

The good news is that any increase is widely expected to be marginal and so while we may see a slight decline in the level of mortgage approvals as a result, it’s unlikely to stop the market in its tracks.”

Recent news that the Bank of England is planning to relax mortgage affordability checks may however offset any initial concerns around inflation, but, experts say, could drive house prices even further as lending becomes larger.

Lee Martin, Head of UK for Unlatch says:

We’ve seen the huge impact that such sustained levels of mortgage affordability have had in driving buyer demand in recent times and this has helped keep house prices buoyant despite the wider turbulence of Brexit and, more recently, the pandemic. 

However, with whispers of an interest rates increase on the horizon, we could soon see house prices dip as the number of buyers entering the market reduces.  Relaxing affordability checks is certainly one way to offset this potential decline and it would continue to entice buyers to borrow more and buy bigger. Of course, if property prices hadn’t seen such consistently high rates of growth, to begin with, then it’s fair to say that such measures wouldn’t be required in the first place.

 By dangling yet another carrot under those noses of the nation’s homebuyers, it’s likely that prices will increase further and affordability will continue to be an issue for many.”

Russell Galley, Managing Director, Halifax, said:

Looking ahead, there is now greater uncertainty than has been the case for quite some time, with interest rates expected to rise to guard against further increases in inflation. Economic confidence may be also be dented by the emergence of the new Omicron virus variant, though it remains far too early to speculate on any long-term impact, given insufficient data at this stage, not to mention the resilience the housing market has already shown in challenging circumstances.

Leaving aside the direct impact of a possible resurgence in the pandemic for now, we would not expect the current level of house price growth to be sustained next year given that house price to income ratios are already historically high, and household budgets are only likely to come under greater pressure in the coming months.”

1 Comment

  • test

    Banks want more people to be in debt to them. Therefore they will manipulate the variables in the housing market. This will result in higher house prices, more debt, more profit for them. Misery for millions, but profit for the bankers. This is what people voted for, welcome to unbridled capitalism.

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