House prices record fastest growth rate in January

Britain’s property market has recorded its fastest growth rate to the year since 2005, UK’s biggest building society announced today.

According to Nationwide's house price index, house prices accelerated by 11.2% in January 2022, up from 10.4% in December 2021. The building society indicated that the average price of a property in the UK was £255,556, which increased by 0.8% from £254,822 in December 2021.

Commenting on the figures released, Robert Gardner, Nationwide's Chief Economist, said: “Annual house price growth accelerated to 11.2% in January, the strongest pace since June last year, and the strongest start to the year for 17 years. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, the sixth consecutive monthly increase.

The mood however, appears to be buoyant. “Housing demand has remained robust, Gardner said. “Mortgage approvals for house purchase 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.

Will the market cool in 2022?

“While the outlook remains uncertain, it is likely that the housing market will slow this year. House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable.

The property market in the United Kingdom has had its strongest start to the year in 17 years.

“For example, a 10% deposit on a typical first-time buyer home is now equivalent to 56% of total gross annual earnings, a record high. Similarly, a typical mortgage payment as a share of take-home pay is now above the long run average, despite mortgage rates remaining close to all-time lows”, the Bank noted in its website.

Meanwhile, ever since the pandemic, it appears that the house price growth has surpassed earnings growth by a significant margin and, consequently, housing affordability has become less favourable. “Reduced affordability is likely to exert a dampening impact on market activity and house price growth, especially since household finances are also coming under pressure from sharp increases in the cost of living” the Economist accentuated.

“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,” Gardner pointed out. “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 housing market activity.”

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