UK house prices rise most since August, defying inflation woes

London

UK HOUSE prices shocked forecasters by posting the biggest increase since August, defying widespread concerns over a mounting cost of living crisis.

The average value of a home rose for a seventh month to a record £260,230 (S$470,012) in February, Nationwide Building Society reported on Wednesday (Mar 2). The 1.7 per cent gain left house prices 12.6 per cent higher than a year earlier. Both readings exceeded economists' expectations.

The housing market has defied the plight of the wider economy since the coronavirus pandemic began, with values rising 20 per cent since February 2020. They have been boosted by temporary tax incentives, a shortage of stock and demand for properties outside urban areas with room to work from home.

However, the boom has stretched the finances of first-time buyers, who are now grappling with the fastest inflation in 30 years and looming increases in energy bills, taxes and interest rates. That had led to predictions that the buoyant market would face headwinds in 2022.

"The strength is particularly noteworthy since the squeeze on household incomes has led to a significant weakening of consumer confidence," said Robert Gardner, Nationwide's chief economist.

Still, "it is likely that the housing market will slow in the quarters ahead", he said.

"Indeed, there is scope for inflation to rise even further as events in Ukraine threaten to send global energy prices even higher," he added.

With the increase in house prices far outstripping pay growth, the price of a typical home is now equivalent to 6.7 times average earnings, up from 5.8 in 2019, Nationwide said. BLOOMBERG