House prices can’t escape reality forever – but they do for now

In February, house prices rose at their fastest since June 2007 – before the financial crisis. They’re up 10.8% in a year, to a record high of £278,123. House prices are up £27,215 in a year – the biggest anniual gain since the index launched 39 years ago.

The Halifax House Price Index for February was released today: february-2022-halifax-house-price-index.pdf

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “House prices can’t escape reality forever. Eventually buyers will have to face the fact that life is getting more expensive and unpredictable, and we’ll see these record price rises slow significantly.

“House prices surged to another record high in February, rising faster than any other time since the financial crisis. Keen buyers and a shortage of properties mean prices are up an incredible £27,215 in a year.

“The imbalance in the market plays a major role here. The RICS survey for January showed that more buyers flocked to the market at the start of this year, with their numbers growing for the fifth consecutive month. Meanwhile, the number of properties going up for sale shrank again – for the 10th month in a row. This is pushing prices higher, despite everything else going on in the world.

“However, reality will filter through eventually. Last week energy bills hit mats around the country, and will have been a real wake-up call to anyone who thought price rises might be manageable. Meanwhile, the cost of filling up the car has soared – and petrol is well above £1.70 a litre in some areas.  And the rising price of oil and energy will eventually filter through into everything that’s manufactured or distributed – which is going to push prices sky high across the board. Inflation at 5.5% feels bad enough, and it’s going to go higher.

“Buyers will start to think twice about whether this is the time to be stretching their finances to afford a bigger property. And if higher inflation feeds into interest rate rises, it will mean a double-whammy for the finances of potential buyers.

“The uncertainty created by Russia’s invasion of Ukraine shouldn’t be underestimated either. It will start to weigh on sentiment, which could put more buyers off.

“Because it takes weeks to complete a house sale, there’s always a delay between when buyers make a decision and when it has an impact on the figures. But the growing worries potential buyers are feeling today will feed through into house prices in April and May, and prices will start to rise more slowly as we go through 2022.”