House prices rise at fastest rate in five years in red-hot property market
House prices have soared to a record high, fuelled by the stamp duty holiday extension and a lack of homes for sale that has turned the property market into a frenzy.
Average values are 8.2pc higher than last April, according to Halifax bank, which is the highest annual growth rate in five years. Between March and April they rose by 1.4pc, hitting an average of £258,204.
This marks another month of record growth, as the average home has gained more than £20,000 in value since the market shut down last year during the first lockdown.
Russell Galley, of Halifax, said prices will continue to be driven by low interest rates, continued demand and a low number of houses on the market.
He said: “The stamp duty holiday continues to add impetus to an extremely active market, magnifying the current shortage of available homes as buyers aim to take advantage of the Government scheme.”
There were twice as many property sales in the first months of this year amid frenzied demand. A total £149bn worth of homes were sold between the start of the year and April, according to property website Zoopla.
However, the fast pace of growth will slow before the end of the year, as unemployment could spike when the Government’s furlough scheme comes to an end, Mr Galley said.
The market will lose momentum later this year when the stamp duty holiday comes to an end, said Iain Swatton, of Dashly, a mortgage switching platform. “While the property boom shows no signs of abating just yet, the bubble will almost certainly burst later this year when the stamp duty holiday comes to an end and the full economic impact of Covid and Brexit take effect,” he said.
Andrew Wishart of analysis firm Capital Economics forecast that "ongoing boom in house prices will be followed by a slowdown, not a bust", adding house price growth is likely to cool to 5-6pc year-on-year by the last six months of this year.
Separate numbers released last week by lender Nationwide reported a one-month jump of 2.1pc in house prices in April. That is the biggest monthly rise in 17 years, since February 2004.
Martin Stewart, of London Money, a mortgage broker, said the market was “white hot” due to a massive lack of housing supply after 25 years of “consistently poor” housing policy. “Demand across all regions and buying demographics bordered on the insane in April. Prices could only go one way as a result,” he said.
The low level of sales and price falls this time last year, during the market closure, will also artificially inflate any comparison between now and then. Mr Wishart calculated that even if house prices remained flat in the next three months, annual price inflation would rise from 5.7pc in March to 7.7pc in June, simply because there was a fall in house prices this time last year.
House prices took a dip in February, falling 0.1pc, according to Halifax figures. This was prompted by fears that buyers would pull out of deals if they could not meet the original stamp duty holiday deadline and it was not extended.
By extending the tax break, Mr Sunak eased this pressure with an additional 300,000 sales in England set to benefit from the saving, according to property website Rightmove.
House prices have also surged on the back of a successful vaccine rollout, which has added to a growing confidence in a recovery. Jeremy Leaf, an estate agent in north London, said the pace of growth may slow when the tapering of stamp duty begins over the summer but house prices will continue to inch higher.
He said: “In particular, when looking at the increase in new potential buyers we have seen on the ground who have little chance of profiting from the stamp duty holiday which prompted so many earlier moves, as well as buyers using savings they have been able to accumulate during lockdown.”
