In the latest Nationwide property index, it confirms that house prices for the year to March 2022 continued their extraordinary rise to 14.3% pa.
The average house price in the UK is now at a record high of £265,312 (up from £232,134). That is a staggering average property price rise of £33,178 in a year.
Last month, the average yearly house price growth was 12.6%pa. Many had expected this to fall but Nationwide put this down to more people at the lower end and starting their property ladder had longer to save deposits when in lockdown and now with larger deposits and wage rises starting to come in as inflation bites.
We see the current property market as being like 1980s Britain. At the time, the UK had record public sector debt, Prime Minister of the time, Margaret Thatcher, along with the Bank of England allowed inflation to run at above trend 2.5%pa inflation for a decade, retail prices increased, wages then grew, stock markets flew, and house prices doubled, and in some cases trebling. Inflation devalues public sector debt before governments repay it. Governments need inflation more so today than ever before.
We are in a similar debt and inflation uptick position today. We can see this trend for a period and then, as happened in the 1980s, interest rates increased to tackle inflation, there was a stock market crash driven by a huge bond market crash in 1987, there was ‘a run’ on sterling forcing the Bank of England to leave the Exchange Rate Mechanism (ERM) and increasing interest rates by 5% overnight and then a property market crash.
Be prepared for this over the coming years, but for now house prices are onwards and upwards.