UK housing market off to best start to year since 2005 | housing market
The UK housing market had its best start to a year since 2005, with annual house price growth reaching 11.2%, according to the UK’s largest building society.
Nationwide said the average house price hit £255,556 in January, the sixth consecutive monthly increase. The annual growth rate accelerated by 0.8 percentage points from 10.4 percent the previous month, reaching its highest level since June.
Robert Gardner, Nationwide’s chief economist, said: “Housing demand has remained robust. Mortgage approvals for the purchase of a home continued to be slightly above pre-pandemic levels despite the sharp increase in activity in 2021 following the stamp duty exemption, which encouraged buyers to advance their transactions to avoid additional tax.
“Indeed, the total number of real estate transactions in 2021 was the highest since 2007 and about 25% higher than in 2019, before the pandemic hit. At the same time, the stock of homes on real estate agents’ books has remained extremely low, contributing to the continued strong pace of house price growth.
Many forecasters, including Nationwide, predict the housing market will cool later this year. Gardner noted that house price growth has far exceeded wage growth since the coronavirus pandemic hit. For example, a 10% down payment on a typical home for a first-time buyer now equals 56% of total gross annual income, a record high. Likewise, a typical mortgage payment as a share of take-home pay is now above the long-term average, even as mortgage rates remain near historic lows.
As affordability deteriorated, household finances were hit by steep increases in the cost of living. Consumer price inflation reached 5.4% in December, its fastest annual rate since 1992, and is expected to rise further with the lifting of the ceiling on energy prices in April. This will likely force the Bank of England to raise borrowing costs again.
Jeremy Leaf, a North London estate agent and former residential chairman of the Royal Institution of Chartered Surveyors, said the national survey “confirms what we have seen on the ground – a resilient market with prices still rising in response to improving but persistently low inventory levels Going forward, higher interest rates and inflation will inevitably impact the pace of price increases and the number of transactions.
Guy Gittins, managing director of London estate agent Chestertons, expects the London market to remain at high levels of activity in the first half of this year.
“For many, 2022 feels like a new chapter and house hunters can’t wait to start the new year in a new home. After a busier than usual December, the London property market continued to see record numbers of buyers throughout January.
“While spacious properties or houses with outdoor space remain in demand, flats in some of London’s most central boroughs are seeing a steady return. This is particularly driven by professionals returning to the office and looking for nearby accommodation as well than international investors and students.