UK house prices have risen at the fastest pace in more than six years, official data showed on Wednesday, fuelled by the stamp duty holiday and demand for larger homes.
According to the Office for National Statistics, average house prices in the UK increased 8.6% in the year to February, up from January’s 8.0% rise and the highest increase since October 2014. It was also above consensus, for around 8.0%.
The average house price is now £268,000 in England, with the north west reporting the highest annual growth, at 11.9%. London saw the lowest growth, at 4.6%. In Scotland, the average house price is now £162,000.
The ONS noted: “Recent price increases may reflect a range of factors, including some possible changes in housing preferences and a response to the changes made to property transaction taxes across the nations. The pandemic may have caused house buyers to reassess their housing preferences.”
The average price of detached properties increased by 9.1% in the year to February, while flats and maisonettes rose by 6.7%.
The chancellor Rishi Sunak introduced a stamp duty holiday last year. Originally intended to end last month, the tax break was extended until the end of June in the budget.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “House prices have jumped because many households have decided to allocate a larger fraction of their incomes towards housing costs in response to the pandemic. The impending – now postponed – reduction in the threshold for stamp duty also turbocharged the housing market during the winter.
“The surge in prices is all the more remarkable, given that mortgage rates have jumped over the last year and job insecurity has been high.
“House prices will likely rise a little further over the summer, now that future income prospects have brightened, consumer confidence has recovered and surplus cash is burning a hole in some households’ pockets.”
Howard Archer, chief economic advisor to the EY Item Club, said: “[We] now expect the housing market to show vigour in the near term, and a modest firming of prices. The market will also likely be helped by the extension of the furlough scheme at the end of September.
“However, the EY Item Club is doubtful this will be sustained for long, as the strengthening of the housing market has been outsized relative to economic fundamentals. [We] suspect house prices will be flat year-on-year by early 2022. [There are] some quarters of failing prices likely at the end of 2021 and early in 2022, as the stamp duty benefit ends, unemployment rises and there is a waning of pent-up demand.”
The ONS calculates house price inflation using data from HM Land Registry, Registers of Scotland and Land and Property Services Northern Ireland.