UK House Prices Reach Record High

Amidst recent financial market volatility and tension surrounding potential interest rate hikes, UK residential property prices have experienced record breaking gains this month. This week property website Rightmove published their House Price Index for September. The results are somewhat mixed.

The average asking price for a house in the UK is up 0.9% to £294,834 in September, with demand fuelled by cheap borrowing exceeding supply as a result of many owners being reluctant or unable to move. Such a monthly increase has not been seen since September 2002, with asking prices up 6.4% from this time last year.

Although on average the price for a home has risen by £2,550, Rightmove said that the property-rich stand to gain the most whilst first-time-buyers have seen their prices stall with a loss of -1.1%. Miles Shipside, Director of Rightmove and housing market analyst said:

“This year’s price surge in the first-time-buyer sector has stalled this month, and has now been overtaken by second-stepper homes both in terms of monthly and annual increases. It looks like some of those buying typical first-time-buyer properties are now struggling to afford prices in this bracket that have on average gone up by nearly £10,000 in the last year, hence new sellers are asking for less. Owners of first-time-buyer properties, often the sector with the least equity, are now finding that the gap to jump up from their first home to the second step on the ladder has got bigger. The top of the range also accelerated upwards this month, as the buoyant market momentum that started at the bottom feeds up into higher price brackets as equity-rich home-movers trade up.”

Amongst the top 15 highest-priced counties, prices have risen by double the national average. As highlighted by the Royal Institution of Chartered Surveyors (RICS) earlier in the year, new seller numbers are down at record lows. Rightmove says that the volume of properties being put up for sale has decreased by -4.9% in the North and -7.1% in the South. Strangely, although the decrease is comparable, it’s only translating to higher prices in the South. Shipside voiced his opinion on the matter and said:

“The middle and upper-price sectors have increased the most this month. With this growing equity the property-rich potentially have more options to move, but if the property they desire is not up for sale or has increased beyond their reach then it seems many are staying put and exacerbating the supply shortages. Many home-owners in the north also seem unable to move, though this is as a result of lack of equity growth meaning they may have to wait for some of the southern-based price boom over the last five years to ripple up north. All are evidence of the growing demand outstripping suitable supply and housing costs continuing to rise.”

The results shown in the Rightmove report have come as a shock to many housing market analysts. Whilst the continued increase in housing prices can certainly be viewed as promising for the ongoing economic recovery and particularly during times of such global financial volatility, the lack of houses being put up for sale and the sharpening of a North/South price division is certainly a cause for concern. With heated debate amongst analysts still ongoing with regards to whether interest rates will be going up or down, and RICS forecasting that prices in the UK will finish up the year 6% higher than they started, the subject of UK house pricing is definitely one to watch.

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To read the full Rightmove House Price Index, click here.

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