Annual house price within the UK is now at its strongest pace since June 2021. According to new figures, house price growth has accelerated by 11.2% in January which happens to the strongest start to the year for 17 years!
Prices has rose by 0.8% month-on-month, after taking into account of the seasonal effects, the sixth consecutive monthly increase according to Nationwide HPI.
Robert Gardner, Chief Economist for the world’s largest building society, said: “Housing demand has remained robust. Mortgage approvals for house price purchases have continued to run slightly above pre-pandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax.
“Indeed, the total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck.
“At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth.”
Despite expectations remaining uncertain, it is likely that the housing market will slow this year, according to Gardener.
He further explains that the residential property price growth has surpassed the country’s income growth by a wide margin since the COVID-19 pandemic began and as a result, people have struggled to afford homes.
To give you an example, many first-time buyers save up a 10% deposit for their future home, which actually equates to 56% of total gross annual earning (a record high!).
Robert continued: “Reduced affordability is likely to exert a dampening impact on market activity and house price growth, especially since house finances are also coming under pressure from sharp increased in the cost of living.
“Consumer price inflation reached 5.4% in December, its fastest pace since 1992. This is more than double the Bank of England’s 2% target and inflation is set to rise further in the coming months as the energy price cap is increased. This rapid rise in inflation has been an important factor denting consumer confidence in recent months, especially how people see their own personal financial situation evolving, although as yet, this has done little to dent the house market activity.
“High inflation and growing confidence that the Omicron variant will not derail the wider economic recovery has led to increased expectations that policymakers will increase interest rates further in the months ahead. This will further reduce housing affordability if it feeds through to higher mortgage rates, although to date a significant proportion of the rise in longer term interest rates seen in recent months has been absorbed by lenders.”