UK house prices rise to highest level since financial crisis

UK house prices rose by almost £3,000 in June, taking the average to £216,823, a level not seen since before the financial crisis in 2007. However, annual price growth slowed to 8.4% in June from 9.2% the previous month with the market yet to react to Brexit.

UK house prices continued to rise in June, adding almost £3,000 in a month, stretching affordability to levels not seen since the run-up to the financial crisis in 2007, a new survey suggests.

Halifax said it was too early to say how the referendum that sanctioned the UK's decision to leave the EU will impact the housing market, but added there were signs the pace of growth is easing.

The price of the average home in the UK rose by 1.3 per cent between May and June, or by £2,708, to hit £216,823, up from 0.6 per cent the previous month, according to the latest index by the mortgage lender.

Slowdown: Halifax said it was too early to say which kind of impact Brexit will have on the housing market, but added there were signs the pace of growth was easing

Meanwhile, the ratio of house prices to earnings rose to 5.70 in June from 5.65 in May, marking its highest level since October 2007.

This means that buying a new home will cost the average workers close to six years of their earnings before tax.

On an annual basis, however, prices grew by 8.4 per cent, down from 9.2 per cent in May, posting the lowest growth since July last year.

Martin Ellis, Halifax housing economist, said: ‘There is evidence that the underlying pace of house growth may be easing.’

And added: ‘House prices continue to increase, albeit at a slower rate, but this precedes the EU referendum result, therefore it is far too early to determine any impact since.’

The Bank of England this week warned that property prices ‘had become stretched’ in recent months – meaning a cooling of the market was likely at some point regardless of the Brexit vote.

Halifax’s figures are in marked contrast to Nationwide’s, which reported that house prices only edged up 0.2 per cent on a monthly basis and by 5.1 per cent in the year to June.

House price to earnings ratio rose to 5.70 in June from 5.65 in May, the highest level since October 2007

Howard Archer, chief economist at IHS Global Insight, said that, despite the marked rise in house prices in June, they believed the prospects for the housing market have deteriorated ‘markedly’ following the Brexit vote.

‘Housing market activity and prices now look to be at very serious risk of an extended, marked downturn following the UK’s vote to leave the EU. This is likely to weigh down markedly on economic activity and consumer confidence, which is not good news for the housing market. Unemployment could also well rise over the coming months,’ he said.

He added that house prices were also likely to be under pressure from increasingly expensive house prices relative to earnings and tighter checking of prospective mortgage borrowers by lenders.

On the other hand, the prospect of a further cut in interest rates and a shortage of properties on the market will have some limiting impact on the downside for house prices, Archer said.

IHS expects house prices to fall by 5 per cent over the second half of this year and by another 5 to 7 per cent in 2017.

But Russell Quirk, founder and chief executive at online estate agent eMoov.co.uk. said the figures, even in the wake of Brexit, show that the UK housing market was ‘fundamentally’ strong.

‘With a continuing, acute shortage of new housing being built and a growing population even if immigration numbers are now curtailed, the demand vs supply imbalance and the prospect of even lower interest rates will underpin the market. Even if there are short term confidence wobbles fuelled by a media hungry for bad news,’ he added.

Quarterly figures: House prices in the three months to June grew at the slowest pace since December 2014

Jonathan Hopper, managing director of agents Garrington Property Finders,said: 'The Halifax data usually paints the rosiest picture of all Britain’s rival house price indices, and the surprisingly brisk rate of growth it recorded in the weeks before the EU referendum was no exception.

'But that pre-referendum market – in which steady price rises were underpinned by limited supply – now feels an age ago.

'The Brexit result means all bets are off, and the market’s psychology has fundamentally shifted. While it’s too early to know how much prices have fallen, sellers are already behaving as if a fall is coming. Many of those who have to sell are starting to offer discounts, often big ones.'

Rob Weaver, director of investments at property crowdfunding platform Property Partner said: ‘This is a snapshot of the market pre-Brexit, and while the vote to leave has resulted in a political earthquake, the fundamentals in the housing market remain unchanged - people still need a roof over their heads.’

He highlighted how house transactions slowed down since the stampede in March to beat the stamp duty deadline, but added that sales should start to pick up in coming months.

‘While people clearly delayed house purchases in the lead-up to the referendum, that backlog in transactions should unwind through the second half of the year. Life decisions like moving house can’t be put on hold forever,’ he said.