Record High for August House Prices

House prices hit a record high in August 2021, but the pace of annual growth still continues to be slow, according to the latest Halifax House Price Index (HPI).

The average house price in the UK is now £262,954, which is the highest on record. However, house price inflation slowed further, to 7.1%, with Wales remaining the strongest region or nation, and London still seeing a lag.

As expected, given recent trends at a UK level, annual house price inflation is slowing in most nations and regions of the country.

Wales is still the strongest performing area, with annual house price inflation at 11.6% – the only double-digit rise recorded in the UK in August. The South West of England is also experiencing strong growth, at 9.6%; this is most likely a reflection of the ongoing demand for rural living in the region.

Some areas in the country appear to have headroom for a stronger price growth, in particular the North East which sees house price inflation at 8%. Northern Ireland also saw prices rise in line with annual house price inflation of 9.3% in August. However, Scotland has seen growth slow to 8.4%.

Greater London continues to lag behind the UK as a whole, registering just a 1.3% annual increase in prices in August; and over the latest rolling three-monthly period, the UK capital was the only region or nation to record a fall in prices (-0.3%). The year-over-year rise in London was also the weakest seen in 18 months.

Commenting on the latest Halifax House Price Index, Stuart Law, CEO of the Assetz group, said: “While it is generally expected that house price growth will simmer over the next few months as the stamp duty holiday comes to an end, we do not expect this slowdown to last very long. Deep-rooted changes in consumer trends brought on by the pandemic will continue to stimulate house price growth over the longer term as homeowners look for larger homes in more rural areas going forward.

“We are already seeing some of the effects of this, with London again recording particularly weak annual house price growth. As more and more businesses look to employ a hybrid way of working in future, we expect this trend to continue with house price growth in more rural, open areas such as Wales and the North of England outstripping the capital now people no longer have to commute to work five days a week.

“While some house price growth is positive – particularly when it helps balance out property prices across the country – there is a risk that the market may overheat if these shifting demands are not met with sufficient new housing stock that fits the post-Covid criteria. Housebuilders, however, can help moderate this growth, with SMEs in particular utilising their expert local knowledge and ability to adopt innovative housebuilding processes at speed to create more housing stock and meet changing consumer needs.

“We have already received hundreds of millions of pounds worth of loan applications from housebuilders looking to leverage this opportunity and help meet the nation’s housing demands. However, broader support is needed in the form of increased funding and streamlined planning processes to create a more sustainable market environment over the longer term for all.”

Russell Galley, Managing Director at Halifax, commented: “Average house prices climbed again in August, with the cost of a property increasing by 0.7% or £1,789. Back-to-back monthly price gains have now pushed the cost of a typical home to a record of £262,954, topping the previous high (£261,642) recorded in May this year.

“Given the rapid gains seen over the past 12 months, August’s rise was relatively modest, and the annual rate of house price inflation continued to slow, hitting a five-month low of 7.1% (versus 7.6% in July). However, compared to June 2020, when the housing market began to reopen from the first lockdown, prices remain more than £23,600 higher (or +9.9%).

“Much of the impact from the stamp duty holiday has now left the market, as highlighted by the drop in industry transaction numbers compared to a year ago. However, while such Government schemes have provided vital stimulus, there have also been other significant drivers of house price inflation.

“We believe structural factors have driven record levels of buyer activity – such as the demand for more space amid greater home working. These trends look set to persist and the price gains made since the start of the pandemic are unlikely to be reversed once the remaining tax break comes to an end later this month.

“Moreover, the macroeconomic environment is becoming increasingly positive, with job vacancies at a record high and consumer confidence returning to pre-pandemic levels. Coupled with a supply of properties for sale that looks increasingly tight; and barring any reimposition of lockdown measures or a significant increase in unemployment as job support schemes are unwound later this year, these factors should continue to support prices in the near-term.”

Commenting on the latest Halifax House Price Index, Jan Crosby, UK head of infrastructure, building and construction at KPMG, said: “Housing demand remains robust across the UK with demand continuing to outstrip supply, helping to drive up prices to a record high in August. First-time buyers and existing renters are keen to get on the ladder quickly and this is facilitated through cheap and high Loan to Value (LTV) mortgages along with, for some, savings built up during the pandemic. Moves to the country out of urban areas to continue to be a trend although there is some increase being seen in city apartment markets once again.

“While the overall pace of annual growth continues to slow, the tide of house price inflation remains high, which means we need more solutions for the delivery of affordable housing. Increasingly, institutional investors and private equity are looking to invest in residential property – often for rent and shared ownership – and housebuilders are looking to tap into that market through partnerships housing. Supply in these areas will grow, but there is a lot of historical under-delivery of affordable housing to catch up on so it is likely to remain an interesting area for funds for some time yet.”

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