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UK house prices: average cost of buying a home surpasses £270,000 for first time as London growth lags behind

·3-min read
 (Shutterstock / ZGPhotography)
(Shutterstock / ZGPhotography)

The average house price across the UK has exceeded £270,000 for the first time since records began, as a result of the pandemic-triggered drive to buy bigger, higher priced homes.

New data from the Halifax, released this morning, revealed that house prices had risen 8.1 per cent over the year to October taking the average value to £270,027.

Despite the economic shock of the Covid-19 crisis, house prices have climbed for the last four consecutive months, the report also showed.

Even after the end of the Government’s stamp duty holiday, which ended in September, demand shows no signs of slowing, particularly in the hot markets of Wales, Northern Ireland and the north west of England with annual growth rates of 12.9 per cent, 11.3 per cent 10.4 per cent respectively.

“UK house prices climbed again in October, as the value of the average property grew by 0.9 per cent in the month, an increase of more than £2,500 in just one month. The annual rate of inflation now sits at 8.1 per cent, it’s highest level since June,” says Russell Galley, mortgage director at the Halifax.

“One of the key drivers of activity in the housing market over the past 18 months has been the race for space, with buyers seeking larger properties, often further from urban centres,” he continues. “Combined with temporary measures such as the cut to stamp duty, this has helped push the average property price to an all-time high.”

London house price growth lags the rest of the UK

London is the weakest region of the UK when measured by house price growth with annual inflation of just 0.8 per cent in the 12 months to October from an increase of just 0.1 per cent in September – which was the lowest year-on-year rise since Covid-19 first struck in February 2020.

The average cost of a home in London has risen by nearly £20,000 during the pandemic and now stands at £514,907 — the highest in the country. The stamp duty saving therefore made less of a dent into the overall cost of buying a new home and moving in the capital than elsewhere.

However, Guy Gittins, chief executive of Chestertons, claims that slower price growth in London is down to healthier levels of stock than elsewhere in the country.

“Our buyer levels are up 60 per cent at the moment and we are seeing a record level of transactions. This is a bell weather for an active market,” says Gittins. “There is just more churn in London at the moment as lots of different people on different rungs of the ladder are moving about and freeing up stock.”

Interest rate rises: is now the time to fix?

First-time buyers, supported by the bank of mum and dad, and historically low mortgage rates also propelled house buying activity despite the backdrop of the pandemic, the Halifax said.

Only yesterday the Bank of England announced that interest rates will remain flat this month, although economists expect them to rise very soon in a bid to control the inflation this winter with rising fuel and food prices.

Experts believe there is a rush to secure a fixed mortgage rate now before an inevitable hike, which is also powering home sales this autumn.

“With the Bank of England expected to react to building inflation risks by raising rates as soon as next month, and further such rises predicted over the next 12 months, we do expect house buying demand to cool as borrowing costs increase,” says Galley.

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