The UK housing market continued to boom in March, official data showed on Wednesday, after house prices rose at their fastest pace since mid 2007.
According to the Office for National Statistics’ latest house price index, the average price of a house in the UK rose by 10.2% in March, up from February’s 9.2% increase, for the fastest annual growth since August 2007.
The eleventh consecutive month of rises, it was also above forecasts, with most analysts predicting an increase of around 7.7%.
Month-to-month, the unadjusted house price index rose 1.8%.
In England, the average house now costs £275,000, £24,000 more than March 2020. In Scotland and Wales, the average price is £167,000 and £185,000 respectively, and £149,000 in Northern Ireland.
The ONS said: “The pandemic may have caused house buyers to reassess their housing preferences. We have seen the average price of detached properties increase by 11.7% in the year to March, in comparison to flats and maisonettes increasing by 5.0% over the same period.”
It added that the stamp duty holiday “may have allowed sellers to request higher prices as the buyers’ overall costs are reduced.”
The tax break, introduced in July 2020 by the Chancellor to support the housing market, was extended at the March budget.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The housing market went into overdrive in March as people rushed to complete transactions before they believed the threshold would return to £125,000.
“The announcement that the threshold would be maintained at £500,000 until the end of June, and then would be lowered to £250,000 before returning to £125,000 at the end of September, was made on 3 Mach, after prices had been agreed for most transactions that through that month.
“In the near term, we see little sign of the boom in house purchase demand fading. Nonetheless, the end of September likely will mark a prolonged malaise in the market, absent any other government policy changes. Mortgage rates are higher now than they were pre-Covid, whereas households’ incomes are not.”
Howard Archer, chief economic advisor to the EY Item Club, said: “The EY Item Club is doubtful that the renewed vigour in the housing market will be sustained for an extended period, as the strengthening of the housing market has been outsized given economic fundamentals.
“[We] suspect that house prices will lose momentum later this year, and could well be flat year-on-year by early 2022 with some quarters of falling prices. This will be down to the stamp duty benefit ending, unemployment rising and a waning of pent-up demand.
“Housing market activity may also be affected from the latter months of 2021 by growing expectations that interest rates could start to rise before long.”
The ONS house price index is calculated using data from HM Land Registry, Registers of Scotland, and Land and Property Services Northern Ireland.
