House prices have climbed to record highs after buyers were not deterred by rising mortgage rates and surging inflation.
The average home cost £282,753 in March, rising 11pc over the last year and up £43,577 in the two years since the pandemic started, figures from mortgage lender Halifax have shown.
However, dramatic price inflation in rural areas has forced young people out of the countryside and into urban locations, experts have warned.
A poll by the Country Land and Business Association, a rural trade body, found eight in 10 respondents living in the countryside said the lack of affordable housing had priced out first-time buyers.
The South West of England recorded the fastest growth over the last year, according to Halifax, with the average property rising 14.6pc to £298,162 in the year to March. House prices in the region grew at the strongest pace in 18 years.
Meanwhile, London price tags have started to rise higher after a period of slower growth, as young home buyers return to the city. Prices in the capital have risen 5.9pc year-on-year, to an average £534,977.
Nicholas Finn, of buying agents Garrington Property Finders, said house prices in London were now playing catch up with the rest of the country.
“While the growth in London is modest by national standards, it’s a huge acceleration compared to where it was at the end of 2021 – and a clear indication of buyers’ resurgent interest in city living,” he said.
Russell Galley, of Halifax, said rising prices were due to a combination of a limited supply of homes up for sale and strong demand from buyers.
“Although there is some recent evidence of more homes coming onto the market, the fundamental issue remains that too many buyers are chasing too few properties,” he said.
But the rapid rate of growth will not last and house price inflation will slow down as higher interest rates and a higher cost of living squeeze consumer finances, Mr Galley warned.
House prices are up 11pc over the last 12 months, gaining £28,113 in a year, roughly equivalent to average earnings.
Sarah Coles, of stockbroker Hargreaves Lansdown, said first-time buyers saving towards a 10pc deposit would have to set aside an additional £2,811 just to be in the position they were in a year ago. “Your home made almost as much money as you did last year. But while homeowners might feel better off on paper, for anyone trying to get onto the ladder, or move up it, this is pushing properties even further out of reach,” she said.
Gareth Lewis, of lender MT Finance, said urgent action should be taken to build more new homes.
“First-time buyers are being squeezed left, right and centre, needing more money for a bigger deposit while the cost of living is also going up exponentially. It becomes a vicious circle which should inevitably stem the flow of property transactions,” he said.