UK house prices surge at strongest annual pace since 2007

[LONDON] UK house prices surged at the fastest annual pace since before the global financial crisis started in 2007.

The mortgage lender Halifax said the average value of a home rose for an eighth month to a record £278,123 (S$500,717) in February. The 0.5 per cent gain last month left prices 10.8 per cent higher than a year ago.

Halifax warned that growth may slow in the coming months as consumers feel a squeeze on the cost of living, with taxes and energy bills both set to jump in April. It's also concerned about the impact of higher interest rates, a shortage of properties for sale and the hit to confidence from the war in Ukraine.

"Geopolitical events expose the UK to new sources of uncertainty," said Russell Galley, managing director of Halifax. "These factors are likely to weigh on buyer demand as the year progresses, with market activity likely to return to more normal levels and an easing of house price growth to be expected."

House prices enjoyed a stellar run during the pandemic, fuelled by record-low borrowing costs, a temporary tax cut on purchases and a demand for more space.

"Lack of supply continues to underpin rising house prices, with recent industry surveys showing a dearth of new properties being listed, now a long-term trend," Galley said. "This may be a particular issue at the larger end of the property market."

Affordability is already stretched for first-time buyers, and now they face a brutal cost of living squeeze that is set to be made worse by the surge in oil and gas prices following Russia's invasion of Ukraine.

At the same time, taxes are due to go sharply in April and the Bank of England is expected to deliver a series of interest-rate rises this year to tame runaway inflation. BLOOMBERG