Housing crisis: Welsh property prices hit another record high in April despite predicted slowdown

Welsh house prices hit another record high in April, rising to £214,396, according to Halifax, despite a predicted slowdown.

However, at a 14.2% annual rise, it means that Wales is now no longer the area with the fastest rising annual house prices, beaten out by Northern Ireland at 14.9% and the South West of England at 14.8%.

There is also expected to be a slowdown in growth during the rest of the year as the cost of living crisis and the Bank of England’s interest rate hike dampens down the market.

However, property is unlikely to become affordable for many soon. Both Wales and Scotland hit new highest-ever prices, amid concerns about people not being able to buy property in their own communities.

The average UK house price increased by more than £3,000 in April, in the longest run of monthly rises since 2016, according to an index. The average property value rose by 1.1% or £3,078 last month, Halifax said.

Russell Galley, managing director of Halifax, said: “This was the 10th consecutive month that property values have increased, the longest run of continuous gains since the end of 2016.”

‘Impact’

The Welsh Government has already announced measures to try and take the heat out of the housing market, including an increase to the maximum level of council tax premiums for second homes, as well as new local tax rules for holiday lets.

The measures are part of a wider commitment to address the issue of second homes and unaffordable housing facing many communities in Wales, as set out in the Co-operation Agreement between the Welsh Government and Plaid Cymru.

As part of the changes, the maximum level at which local authorities can set council tax premiums on second homes and long-term empty properties will be increased to 300%, which will be effective from April 2023.

They are also looking at possible changes to land transaction tax (LTT) to allow local authorities to set a higher, additional rate in areas where they think there are too many second homes.

The Senedd debated the issue of second homes last week, with the Welsh Conservatives saying that the Welsh Government’s actions were a “blunt instrument that’ll end up as a hammer blow to the tourism sector instead”.

“And the key reason for that is the Welsh Government has either been unable or unwilling to make a distinction between second homes and self-catering holiday lets,” Senedd Member Tom Giffard said.

“This means that many normal people across Wales who let out flats, houses and cottages to visitors will be completely unable to meet the new threshold and it will price them out completely of ever being able to afford to offer visitor accommodation to people across Wales and internationally.

“And that isn’t a political argument; that’s something that’ll impact real tourism operators here in Wales.”

But Welsh Government Finance Minister Rebecca Evans said that the aim was to ensure that second home owners “make a fair contribution to the communities in which they have homes or run businesses”.

“This in turn is part of our three-pronged approach to addressing the impact that large numbers of second homes and holiday lets can have on communities and the Welsh language,” she said.

“The views conveyed in the consultation, including from the wider tourism sector, clearly support a change to the criteria for self-catering accommodation to be classified as non-domestic.

“Responses indicated that genuine holiday accommodation businesses would be able to satisfy increased letting thresholds and a wide variety of possible alternatives were suggested.

“Increasing the thresholds will provide a clearer demonstration that the properties concerned are being let regularly and are making a substantial contribution to the local economy.”

‘Larger families’

The typical house price was a new record of £286,079 – an annual increase of 10.8%.

At the current rate of growth, the price of a typical home could hit £300,000 by the end of the year, but Halifax said that remains unlikely given the economic conditions predicted.

Prices have increased by £47,568 on average over the past two years, the report said.

It took the previous five and a half years to make an equivalent leap, with values increasing by £47,689 on average between October 2014 and April 2020.

Here are average house prices in April followed by the annual increase, according to Halifax:

• East Midlands, £237,466, 12.8%
• Eastern England, £334,570, 11.9%
• London, £537,896, 6.2%
• North East, £163,431, 8.9%
• North West, £217,199, 10.7%
• Northern Ireland, £182,565, 14.9%
• Scotland, £196,471, 8.3%
• South East, £390,095, 12.1%
• South West, £301,632, 14.8%
• Wales, £214,396, 14.2%
• West Midlands, £241,632, 10.4%
• Yorkshire and the Humber, £197,955, 10.3%

Russell Galley said: “The imbalance between supply and demand persists, with an insufficient number of new properties coming on to the market to meet the needs of prospective buyers and strong competition to secure properties driving up prices.

“There remains evidence that this demand is centred on larger family homes rather than smaller properties such as flats. Over the past year, prices for detached and semi-detached properties have risen by over 12%, compared to just 7.1% for flats.

“The net cash increase for detached properties, at just under £50,000 over the past year, is nearly five times more than for flats.”

Higher

House prices have continued to climb despite the cost-of-living crisis putting a financial squeeze on households.

Inflation is expected to hit 10%-plus in the coming months and the Bank of England raised the base rate to 1% this week, pushing up costs for some borrowers.

Mr Galley continued: “The headwinds facing the wider economy cannot be ignored.

“The house price-to-income ratio is already at its highest ever level, and with interest rates on the rise and inflation further squeezing household budgets, it remains likely that the rate of house price growth will slow by the end of this year.”

Across the UK, Halifax said Northern Ireland is the strongest performer for annual house price growth, at 14.9%, although the average house price there remains some way short of its record of £230,931, set in the summer of 2007.

Six out of nine English regions recorded double-digit annual house price inflation during April.

In the South West, the average house price broke through the £300,000 barrier for the first time, at £301,632.

Annual house price inflation in London continues to lag the rest of the UK, at 6.2%.

However, average property values in London remain much higher than the rest of the UK, with the latest average price of £537,896 also a new record for the city, Halifax said.