Easter traditionally marks the start of the annual housebuying season but this year there has been no need for potential sellers to mow the lawn and give the living room a lick of paint because the market’s already running hot.
Demand for property has been strong ever since the UK first came out of lockdown in the summer of 2020. Mortgage approvals are up on pre-pandemic levels and prices have climbed ever higher.
There are various measures of house price inflation but all of them tell the same story: annual increases in excess of 10%. According to Britain’s biggest mortgage lender, the Halifax, the price of the average UK home rose by just over £28,000 in the past year, which is pretty much the same as the average UK worker earned over the same period.
Regular readers of this column will know that for some time I have been questioning how long the boom can go on and the answer appears to be longer than I anticipated. Demand for residential property continues to exceed its supply even though interest rates have started to go up and households are facing the biggest squeeze on their living standards in decades.
The hit to living standards caused by prices rising faster than wages has taken its toll on consumer confidence, and that may well slow the market in the coming months. Historically, there is a close correlation between house prices and how happy consumers feel but as Holger Schmieding, the chief economist at Berenberg, has pointed out, a big gap between the two measures has emerged this year.
There are structural reasons for the mismatch between housing demand and supply in the UK: this is a smallish country with relatively high population density, tight planning restrictions and a tax system that incentivises home
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