House prices will surge as buyers chase limited supply, says Halifax
06-06-2015
HIGH demand for homes amid a shrinking market is likely to fuel a surge in property prices this year, Britain's biggest mortgage lender has warned.
By Sarah O'Grady
House signs GETTY
House prices are set to go up
Values increased by 8.6 per cent year-on-year in May - the strongest growth in seven months, the Halifax reported.
Now economic confidence and low mortgage rates against a tight supply of homes for sale will push prices up further.
The average UK house price stood at £196,067 last month after edging down by 0.1 per cent compared with the previous month. In April, prices had jumped by 1.6 per cent month-on-month.
Martin Ellis, housing economist at Halifax, said: "Housing supply remains extremely tight, with the stock of properties available for sale currently at its lowest level for many years.
"At the same time, ongoing economic recovery, increasing employment, real earnings growth and very low mortgage rates are all supporting housing demand.
"This combination has kept annual house price inflation well above earnings growth, although activity levels are subdued.
"The imbalance between supply and demand is likely to continue to push up house prices over the coming months.
"Looking further ahead, the increasing level of house prices in relation to earnings is expected to dampen house price growth."
He said during 2015 so far, year-on-year house price growth has remained within a range of eight and nine per cent, compared with annual growth of more than 10 per cent seen in summer 2014.
Housing supply remains extremely tight, with the stock of properties available for sale currently at its lowest level for many years.
Martin Ellis, housing economist at Halifax
The supply of homes on the market remains tight, with the Royal Institution of Chartered Surveyors recently reporting the stock of homes for sale has been falling.
On a quarterly basis, house prices between March and May were two per cent higher than the preceding three months.
This was lower than the 2.6 per cent quarterly increase recorded in March.
Halifax also said its housing market confidence tracker showed that the proportion of people who think the next 12 months will be a good time to buy increased in April.
Bank of England figures recently showed that the number of mortgage approvals jumped to a 14-month high in April.
Stephen Smith, of Legal & General Mortgage Club, said: "The Government has promised to build more houses and we need to see action on this now so that a strong pipeline of new homes is in development.
"This will keep prices affordable."