Market Report

Rising home prices help propel FTSE 100 to record high

For sale, sold, homes, housing, property
Average home prices are at their highest for a year (pic: Terry Murden / DB Media Services)

Average asking prices for UK homes rose this month at the fastest annual pace in a year, driven by property at the top of the market, according to a survey that helped push stock prices higher.

Prices increased 1.7% to £372,324 – just £570 below the record in May 2023 – with larger homes seeing the biggest growth in activity.

Rightmove said the number of new sellers coming to the market was up 12% compared to this time a year ago, while the number of sales being agreed was 13% higher. The number of new sellers of larger homes was up 18% compared with last year.

Tim Bannister, Rightmove’s director of property science, said: “The top-of-the-ladder sector continues to drive pricing activity at the start of the year, with movers in this sector typically less sensitive to higher mortgage rates, and more equity rich, contributing to their ability to move.

“While some buyers, across all sectors, will feel that their affordability has improved compared to last year due to wage growth and stable house prices, others will be more impacted by cost-of-living challenges and stickier than expected high mortgage rates.”

The encouraging news boosted the prices of housebuilders on the London Stock Exchange. Persimmon rose by 31.5p to 1317p and Barratt Developments was 10.25p higher at 451.75p.

The rise in the price of homes coincided with more speculation of early interest rate cuts and a report from Jefferies, the investment bank, whose consumer cashflow model showed that people would see a “substantial disposable income recovery” over the next year.

There was also a positive report from the EY Item Club which expects growth to accelerate next year as falling inflation, interest rates and energy costs encourage higher consumer spending.

Marks & Spencer, which led the FTSE 100 to a record close, was 10.75p higher at 256.5p and J Sainsbury rose 10.25p to 269p. Next, Tesco and B&M were also strongly higher.

The FTSE 100 index rose 128.02 points, or 1.65%, to 8,023.87 outperforming the European STOXX 600 and Germany’s Dax.

Markets are now pricing in a 25 basis point cut to interest rates by August, though there is continued speculation that the Bank of England will cut in June ahead of the US Federal Reserve which is battling stubbornly high inflation.

However, UK consumer price growth has declined more slowly than forecast to 3.2% last month.

Sir Dave Ramsden, the Bank of England deputy governor, last week said that UK inflation was on course to decline and stabilise at the Bank’s 2% target this year.

A variation in the outlook for borrowing costs between the US and the UK has strengthened the value of the dollar against the pound. That has helped push constituents of the FTSE 100 higher, given the majority generate revenue in dollars. Sterling has fallen to $1.23, its lowest since November.

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