- Average homebuyer
needs to find £13,000 more than a year ago
rising at 7.3 per cent annually
- House prices to earnings hits 4.74 per
cent - highest since October 2008
House prices jumped by almost £2,000 in January, Halifax has reported,
as buyers hunted new homes amid a dwindling supply of good properties for sale.
Property prices have leapt almost £13,000 in a year, to an average of
£175,546, the mortgage lending giant’s index showed. They now stand at their
highest level in relation to wages in more than five years, with Halifax’s
price-to-earnings ratio stretched to 4.74.
January saw annual property inflation stand at 7.3 per cent. This has
slipped back from the 7.7 per cent hit in November, but still means that house
prices are rising eight times as fast as wages, according to the most recent
ONS data that put earnings up 0.9 per cent in a year.
Headline house price figures are being driven upwards by a boom in
London and the commuter belt, however, a recent ONS report said property values
were now rising in all regions of the country.
There has been a dramatic turnaround from a year ago, when prices were
rising at just 1.3 per cent annually, according to Halifax.
But while the Chancellor George Osborne and Bank of England claim a new
property bubble is not being inflated, critics fear that house prices are being
pushed higher from a point where they are at high levels compared to earnings
while the cost of borrowing is near record lows.
Halifax says its average house price is now at 4.74 times earnings, the
highest level since October 2008.
However, it uses an average annual earnings figure of £37,066 - which it
says is for full-time men - this is far above the ONS average weekly earnings
data that puts the typical annual wage at £24,800.
If the ONS figure is used the Halifax average price stands at seven
Martin Ellis, Halifax’s housing economist, said: ‘With the supply of
properties being slow to respond to more buoyant market conditions,
stronger demand has resulted in continued upward pressure on house prices.
‘Demand has increased against a background of low interest rates and
higher consumer confidence underpinned by signs that the economy is recovering
and unemployment falling faster than expected.
‘Official schemes, such as Help to Buy, also appear to have boosted
housing demand. However, continuing pressures on household finances, as
earnings fail to keep pace with consumer price inflation, are expected to remain
a constraint on the rate of growth of house prices.’
The Halifax index recorded a 1.1 per cent rise in monthly house prices,
while its rolling quarterly figures showed homes up 1.9 per cent.
Property transactions have also picked up over the past year but are
still running substantially below their long-term average levels. Some experts
suggest this reflects the number of homeowners who would like to buy but are
still struggling with the aftermath of the property slump, however, even in
popular areas sales the supply of homes for sale is running at low levels.
In many cases this reflects the high cost of moving, with the best
mortgage still requiring relatively large deposits or equity and stamp duty
eating a big chunk out of movers funds. Those buying homes costing more than
£250,000 face paying the taxman at least £7,500 in stamp duty simply to move.
Alex Gosling, managing director of online estate agents
Housesimple.co.uk, said: 'Prices are up, demand is up, but the real concern is
that supply is still severely lagging. It's the same old story at the moment -
there are buyers galore but simply not enough stock to service the market.
'The lack of sellers putting their properties on the market suggests
that it isn't simply a case of homeowners being slow to respond to buoyant
market conditions. It's more a case that many homeowners simply aren't in a
position to respond.
'Although house prices are rising, in many areas they have a long way to
go before homeowners, who saw their homes plummet in value during the financial
crisis, find themselves out of a negative equity position. I'm sure there are
plenty of homeowners who would love to sell, but until the value of their
property has recovered enough, their hands are tied.'