House prices rise 9% as shortages bite

UK house prices rose 9% in the past year after a strong summer that saw prices leap 3% between June and August, according to the latest Halifax house price index.

Yet buying still makes more sense than renting, with the average first-time buyer paying £56 less for a three-bedroom house than the typical monthly rent.

Halifax housing economist Martin Ellis said the underlying pace of house price growth remains strong.

"House prices in the three months to August were 3.0% higher than in the previous quarter.

“This measure of the underlying rate of house price increased from last month’s 2.5% but remained below June’s 3.3%."

Prices have been driven upwards by a shortage of second-hand properties for sale, Ellis said. “At the same time, economic recovery, real earnings growth and very low mortgage rates are supporting housing demand."

He said strengthening demand and constrained supply will fuel "robust" growth in the short-term.

Stephen Smith, director, Legal & General Mortgage Club & Housing, said the figures show the sheer scale of the rift between supply and demand.

“This imbalance is causing houses prices to climb in months that typically see less activity in the market.

“The country needs to develop a long-term solution to stop house price growth from exceeding inflation and earnings growth. The longer this continues, the more people it will push out of the market.”

Jonathan Adams, director of prime central London estate agency Napier Watt, said: "The market is becoming fragmented with higher-value properties struggling to sell as international buyers become more fickle and are scared off by the tax on purchasing high value residential property.”