Average house prices soar by £33,000 over past year

The cost of a typical UK home climbed to a new record high of £265,312 in March, according to Nationwide building society.

The average price has increased by more than £33,000 in the past year. In March 2021, the average UK house price (opens in new tab) was £232,134.

Property values grew by 14.3% annually, and by 1.1% month-on-month, despite the cost of living crisis. The yearly growth was the fastest annual pace since November 2004, Nationwide (opens in new tab) said, meaning house price growth had hit a 17-year high.

“The housing market has retained a surprising amount of momentum given the mounting pressure on household budgets and the steady rise in borrowing costs. Prices are now 21% higher than before the pandemic struck in early 2020,” said Robert Gardner, Nationwide’s chief economist.

“A combination of robust demand and limited stock of homes on the market has kept upward pressure on prices.”

Lockdown savings have also helped many homebuyers raise a deposit, contributing to the surge in prices.

Lucy Pendleton, property expert at the independent estate agent James Pendleton, added: “The buoyant jobs market and record employment figures are helping sustain confidence and the impact of the latest interest rate rise has yet to bite. In fact, it could even lead to a push to secure new mortgages on fixed deals before prices move out of reach.”

What type of properties have seen the strongest price growth?

Detached properties have seen the strongest price growth during the pandemic, according to Nationwide, one of the UK’s biggest mortgage lenders. 

Between the first three months of 2020 and the first three month of 2022, the average price of a detached property increased by 22.6%, nearly £68,000 in cash terms. Meanwhile, over the same period, flats only increased by 14.1%, around £24,000

“Shifts in housing preferences as a result of the pandemic have been a significant driving factor of housing market activity. Last year, our research identified a ‘race for space’ and this was reflected in price trends by property type, with detached homes seeing the strongest growth and flats the weakest,” noted Gardner.

He added that it was becoming harder for homeowners to trade up, with price gaps between different property types moving to a record high. The price gap between flats and terraced houses has more than doubled since the onset of the pandemic, from around £12,000 to over £25,000.

“However, in many cases households have managed to bridge this gap by moving to a cheaper region. For example, official data shows that the price of a typical flat in London is around £428,000, while a detached property in the East Midlands costs around £350,000,” said Gardner.

Will house prices continue rising?

Experts expect the housing market to start cooling in the months ahead.

“The squeeze on household incomes is set to intensify, with inflation expected to rise further, perhaps reaching double digits in the quarters ahead if global energy prices remain high,” said Gardner.

“Moreover, assuming that labour market conditions remain strong, the Bank of England is likely to raise interest rates further, which will also exert a drag on the market if this feeds through to mortgage rates.”

The consultancy Capital Economics forecasts that the Bank rate (opens in new tab), currently 0.75%, will reach 2%, which will impact the property market. However, it expects house price growth to “slow to a crawl rather than go into reverse”.

How have house prices performed across the country? 

Wales has seen the strongest annual growth (up 15.3%) across the UK, while the south-west is the best performing English region (up 14.4%).

Here are the average house prices in the first quarter of this year plus the annual increase, according to Nationwide:

•  Wales, £201,502, 15.3%
•  South West, £300,936, 14.4%
•  East Anglia, £277,332, 14.2%
•  Yorkshire and the Humber, £199,235, 13.5%
•  East Midlands, £227,275, 13.5%
•  Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £337,094, 12.8%
•  North West, £204,511, 12.4%
•  Scotland, £178,289, 12.0% 
•  West Midlands, £233,136, 11.7%
•  Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £422,428, 11.4%
•  Northern Ireland, £171,095, 11.1%
•  North East, £153,029, 10.6%
•  London, £518,333, 7.4%.

 Additional reporting by Press Association