The Housing Market Appears to be Continuing its Inexorable Rise in Latest UK House Price Index… but this Might Not be the Case

UK house prices increased by 10.8% in the year to December 2021, up from 10.7% in November 2021.

On a non-seasonally adjusted basis, average house prices in the UK increased by 0.8% between November and December 2021, the same increase as during the same period a year earlier (November and December 2020).

House price growth was strongest in Wales where prices increased by 13.0% in the year to December 2021.

The lowest annual growth was in London, where prices increased by 5.5% in the year to December 2021.

The average house price in Northern Ireland increased by 10.7% over the year to Quarter 3 (July to September) 2021.

Northern Ireland remains the cheapest UK country to purchase a property in, with the average house price at £159,000.

The Royal Institution of Chartered Surveyors’ (RICS) January 2022 UK Residential Market Survey reported that new buyer enquiries are gaining momentum slightly at the start of the year, as buyer demand also rises over the month. Sales have steadied in January but are expected to pick-up over the coming three months.

The Bank of England’s Agents summary of business conditions 2021 Q4 reported ongoing strong demand for housing and a shortage of properties for sale, which pushed up prices.

The UK Property Transactions Statistics showed that in December 2021, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 100,110.

This is 20.0% lower than a year ago. Between November and December 2021, UK transactions increased by 7.6% on a seasonally adjusted basis, following a large increase in the month prior.

The Bank of England’s Money and Credit December 2021 release reported that mortgage approvals for house purchases (an indicator of future lending) increased slightly to 71,000 in December 2021, up from 67,000 in November 2021.

England

In England the December data shows, on average, house prices have risen by 1.1% since November 2021.

The annual price rise of 10.7% takes the average property value to £293,339.

The regional data for England indicates that:

• the West Midlands experienced the greatest monthly rise with a movement of 2.6%
• the North East saw the most significant monthly price fall, with a movement of -1.5%
• the South West experienced the greatest annual price rise, up by 13.6%
• London saw the lowest annual price growth, with a rise of 5.5%

Price change by region for England

Repossession sales by volume for England

The lowest number of repossession sales in October 2021 was in the East of England.

The highest number of repossession sales in October 2021 was in the North West.

Average price by property type for England

Funding and buyer status for England

Building status for England

*Figures for the 2 most recent months are not being published because there are not enough new build transactions to give a meaningful result.

London

London shows, on average, house prices have risen by 0.2% since November 2021.

An annual price rise of 5.5% takes the average property value to £521,146.

Average price by property type for London

Funding and buyer status for London

Building status for London

*Figures for the 2 most recent months are not being published because there are not enough new build transactions to give a meaningful result.

Wales

Wales shows, on average, house prices have fallen by 2% since November 2021.

An annual price rise of 13% takes the average property value to £204,835.

There were 2 repossession sales for Wales in October 2021.

Average price by property type for Wales

Funding and buyer status for Wales

Building status for Wales

*Figures for the 2 most recent months are not being published because there are not enough new build transactions to give a meaningful result.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says:

“On the face of it, these figures show the housing market continuing its inexorable rise but maybe that isn’t the case.

Looking behind the numbers we see prices, though a little historic, are virtually unchanged from the previous month.

Buyers are coming to terms with reduced affordability which is compromising confidence to take on yet more debt as inflation hits record highs and interest rates are on the up too.

At the sharp end, we are still finding lack of stock is holding back transactions but increasing energy costs in particular are starting to encourage potential downsizers to think more seriously about the long-term suitability of their present homes, which should help to balance out supply and demand.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says:

“There is further speculation that the Bank of England will raise interest rates again at its March meeting in order to curb runaway inflation, and it remains to be seen what impact this will have on buyer confidence.

Despite the global pandemic, the housing market thrived last year and there are still those who have not yet made their purchases.

Squeezed affordability, however, would be a major issue, preventing first-time buyers in particular from getting on the ladder.

Low mortgage rates have been one of the contributing factors to the housing boom and although some lenders are tweaking mortgage rates upwards on the back of higher money market rates, pricing remains competitive.”

Tomer Aboody, director of property lender MT Finance, says:

“As property prices continued to rise in December, there is a danger that affordability is stretching beyond the means of many would-be buyers.

With inflation rising again to 5.5 per cent, and expectations that it could climb considerably further, the possibility of a further interest rate rise in March looks even more likely.

The housing market is likely to continue to be busy into the spring as buyers fight for every house to make the most of cheap rates before they disappear.

That said, we don’t expect a further increase to result in any major hike in mortgage pricing overnight.

Areas outside of London continue to see the most significant levels of growth, with Wales witnessing the strongest house price growth while London saw the lowest annual growth.

However, with the starting price point lower outside of the capital, any change will be more significant.

With more people starting to return to work in the office, it will be interesting to see whether this will impact those numbers and whether the allure of London will return.”

Walid Koudmani, chief market analyst at financial brokerage XTB comments:

“UK average house prices increased by 10.8% over the year to December 2021, up from 10.7% in November 2021 and continued to indicate a sustained inflationary pressure across the board.

While the situation appears to be slowing slightly, the pressure remains on consumers as they struggle to keep up and could ultimately hinder the ongoing recovery with a noticeable volatility and drop in demand in the short to mid term.”

Ross Counsell, chartered surveyor and director at GoodMove, on today’s ONS House Price Index:

“According to today’s ONS HPI, UK average house prices have increased by 10.8% over the year to December 2021, an increase of 10.7% from the previous month. What’s more, the average house price in the UK hit £275,000 – which is nearly £27,000 higher than this time last year.

This can signal another blow for potential house buyers, who are sure to continually see these stats and feel disheartened that they may never be able to get on the property ladder.

But it’s not all bad news for the year ahead.

I strongly believe that house prices will finally begin to fall this year.

We know the cost of living is continually increasing, with energy prices especially going up in the next few months.

With this in mind, we sadly expect many Brits will have to tighten their belts financially, and may not be looking to move home because they may not be able to afford it.

With less buyer demand comes lower house prices, so I do expect them to fall towards the middle of the year and into the later months of 2022.

This will be a great time for people to look to buy a home, if they can afford to wait.”

Michael Bruce, CEO and Founder of Boomin, commented:

“It’s only fitting that house prices should continue to climb in December, as the curtain falls on what has been quite an extraordinary year for the property market.

However, while the scales of supply and demand remain firmly tipped in favour of the nation’s home sellers, there’s a good chance that the high rate of house price growth seen during the pandemic will now subside, replaced by more incremental gains during the year ahead.”

Head of Corporate Partnerships at Sirius Property Finance, Kimberley Gates, commented:

“We’ve seen many buyers push their budget that little bit further over the last 12 months due greater levels of mortgage affordability and a stamp duty saving.

This has helped drive top line house price growth across the UK and we’ve seen the market continue to go from strength to strength as a result.

With interest rates increasing and the opportunity of a stamp duty saving now long gone, we expect to see a more measured market performance over the coming year.

While there’s certainly no reason to panic, the monthly cost of a mortgage will start to climb for those that aren’t locked into a fixed rate and this will impact the price buyers are willing to pay to climb the property ladder.”

Director of, Henry Dannell, Geoff Garrett, commented:

“The general expectation is that the Bank of England will impose at least two further interest rate increases over the course of this year.

This will bring the base rate up to one percent at the very least and while this remains comparably low to historic highs, those on tracker or variable rates will notice the monthly cost of their mortgage climb significantly.

We’ve already seen a huge uplift in the number of lenders withdrawing or increasing their fixed rate offerings and we believe this will continue.

So for those considering a purchase in 2022, it’s important not to overstretch financially and the best plan of action is to enter the market with plenty of breathing room to help absorb this hike in the cost of borrowing.”

CEO of Octane Capital, Jonathan Samuels, commented:

“The market remains in fine form having defied all expectations during the pandemic and there is little sign of any significant decline on the horizon.

Increasing interest rates and a sharp jump in the cost of living will, of course, have some impact.

We expect this will come in the form of a more conservative approach to borrowing from the nation’s homebuyers in contrast to the gung ho approach seen during much of the pandemic, as they are no longer buoyed by the race for more space and a stamp duty saving.

The result of which will be a slow in the rate of house price growth rather than a property market crash.”

Managing Director of HBB Solutions, Chris Hodgkinson, commented:

“We’re yet to see a let up in the torrential downpour of homebuyer demand that has washed over the property market pretty much since the start of the pandemic.

As a result, those looking to sell are achieving a very good price which is driving property values ever higher.

Current market conditions are so strong that even when transactions are falling through, sellers are securing another buyer immediately and for a higher price than they had agreed during their original sale.

This won’t last forever though and those entering the market this year should tread with a little more caution.

Although demand levels are likely to remain robust, buyers will start to feel the pinch caused by an increase in both the cost of living and borrowing.

So sellers who persist with unrealistic asking price expectations will struggle to see them met.”

Director of estate agent Benham and Reeves, Marc von Grundherr, commented:

“The market outlook for the year ahead remains positive despite dark cloud gathering in the form of increasing interest rates and an inflated cost of living.

While these factors will certainly influence the market to some extent, they are unlikely to dampen our appetite for homeownership and with stock levels remaining insufficient, market values are unlikely to decline anytime soon.

That said, it is likely that the wider UK market will now shift down a gear or two where the rate of house price growth is concerned, with early signs suggesting that London is once again poised to take house price pole position.

Buyer demand for central London flats has picked up considerably and this is a very promising sign given it’s really the core segment of the central London market.

This growing demand will continue to be bolstered by a return to the workplace and most notably, the return of foreign buyers and renters, with these factors continuing to pull London out of the doldrums where it’s sat for much of the pandemic.”

Managing Director of estate agent Barrows and Forrester, James Forrester, commented:

“It’s hard to remember a time when the property market has been firing on all cylinders for such a sustained period and we continue to see numerous areas driving top line market performance forward at quite some rate.

Of course, this rate of growth isn’t sustainable for ever and we expect to see some natural correction in the coming months.

This certainly won’t come in the form of a house price collapse, but those thinking of selling would be wise to do so sooner, rather than later.

There is currently an incredible shortage of stock available on the market and we’re seeing numerous buyers fight it out over a single property.

With such an imbalance, those that do bring their home to market are sure to achieve very close to asking price and, in some cases, quite a bit more.”

Paul McGerrigan, CEO at online broker Loan.co.uk, said:

“Average house prices are now at a record high of £274,712, up a staggering 10.8 per cent in the year, with the strongest performance being in Wales – which saw an increase of 13 per cent in the year.

Demand has remained strong throughout 2021, despite the end of the stamp duty holiday at the end of September and mortgage approvals for house purchase have continued to run well above the pre-pandemic levels.

The main reason the increase has continued past the end of the stamp duty discount is that demand outstrips supply considerably, with fewer properties coming onto the market and a continual stream of buyers wanting more space which has fuelled the phenomenal pace of price growth.

Whilst the outlook for the property market may seem uncertain, with further interest rate rises predicted and an energy price crisis affecting many, there is no evidence that the supply-demand imbalance will change any time soon, meaning there will continue to be upward pressure on house price for some time to come.”