Property

Could the 'golden period' of house price growth be nearing its end?

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20th June 2017

New research from online estate agents, HouseSimple.com, has revealed that UK homeowners have seen the value of their homes increase by more than 40% and almost £60,000 over the past eight years, as they’ve benefitted from a “once-in-a-generation” record low interest rate environment.

According to the report, UK property prices have risen 41.2% since the Bank of England dropped interest rates to 0.5% in March 2009, and then dropped them further to 0.25% in August 2016.  Average prices in Cambridge have almost doubled since March 2009, while average London prices have broken through the £500,000 ceiling.

But this golden period of house price growth could be drawing to an end.

With three members of the Bank of England’s Monetary Policy Committee (MPC) voting for an interest rate rise in June, and inflation steadily rising, we could be close to the first rate rise in almost 100 months.

HouseSimple has analysed how much UK house prices have risen or fallen since March 2009, by looking at average house prices* in 100 UK towns and cities between March 2009 and April 2017. During this period, interest rates remained at 0.5% for over seven years before falling to 0.25% in August 2016, and homeowners across many parts of the country have seen the value of their properties rocket.

The South East has fared particularly well, with seven of the 10 biggest property price rises since March 2009. Cambridge, London and Slough have all seen average house price growth in excess of 90%. However, at the other end of the performance chart, Hartlepool (9% drop), Durham (6.2% drop), Middlesbrough (4.5% drop) - all in the North East - have seen prices fall.

London

Across the Capital, average house price growth has been particularly strong during this unprecedented time of record low interest rates, with prices rising on average 90.8%. The borough of Kensington and Chelsea tops the chart, with average prices increasing by 128.9%, while the less glamorous boroughs of Haringey and Waltham Forest have witnessed impressive price growth since March 2009, with price growth of 111.7% and 106.4% respectively.

Surprisingly, the trendy borough of Camden (74.9%) was one of the worst performing boroughs, although average prices have still grown over 30% more than the UK as a whole.

Alex Gosling, CEO of online estate agents HouseSimple.com, comments: “While UK savers have suffered over the past eight years, millions of homeowners have increased their equity in their homes substantially in this once-in-a-generation low interest rate environment. It’s been a golden period for UK homeowners, but there are signs that it could be coming to an end as the MPC narrowly voted to hold interest rates at 0.25%.

House prices are also under pressure from the political and economic uncertainty of Brexit and the fallout from the disastrous General Election result for the Conservative Party. There is no evidence to suggest that property prices are about to plummet, but homeowners and home buyers do need to plan ahead, and make sure they can cover the impact of interest rate rises on their monthly mortgage payments.

Many homeowners will have never seen an interest rate rise, and may believe rates will never rise. But they will eventually, and when they do, we could see rates rise by 1%-2% quite quickly. With many households already feeling the strain of higher day-to-day costs, monthly mortgage payments going up by several hundred pounds a month could tip them over the edge.”

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