Buoyant housing market slowed down by rising inflation, experts say

Buoyant housing market slowed down by rising inflation, experts say
Photographer: Chris Ratcliffe/Bloomberg

House sales climbed 11.8 per cent at the end of last year, but experts have warned recent rises in inflation could revert the market back to a decline.

Some 113,470 properties were sold last month, compounded by 10.4 per cent house price growth which made 2021 the strongest year for growth since 2006

Jeremy Leaf, former RICS residential chairman and a north London estate agent, said the latest HMRC figures, published today (January 21), demonstrated a year of market resilience, but since then the market had “moved on”.

“These numbers interestingly demonstrate market strength and resilience even in the build-up to Christmas and withdrawal of government economic support in September,” said Leaf, referencing the end of the stamp duty land tax holiday and mortgage payment holidays.

“However, we have moved on since December,” Leaf continued.

“Activity and price rises are slowing a little, not least because of the continuing shortage of stock but concerns about rising inflation and mortgage rates is also compromising confidence when it comes to taking on debt.

“Looking forward, sales will pick up if homeowners can be persuaded to put their properties up for sale at perhaps more realistic levels, as there is no doubt that demand is still strong.”

Leaf wasn’t the only one to highlight the pressures of rising inflation, which hit 5.4 per cent in December according to Bank of England data published earlier this week.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said “there’s every chance” the bounce back in property sales in December is just a “temporary blip”.

Back in October, property sales plummeted to a nine-year low, falling by nearly half (48.4 per cent), but they have recovered since.

“Over the previous two months, sales have been recovering from the lows of October, climbing slightly above the kind of levels we usually see in December,” said Coles.

“However, the lag in these figures means they reflect sentiment before talk of rate rises started in earnest, so this bounce isn’t guaranteed to take off.”

Coles explained that because these figures measured completed transactions, there was a 2-3 month lag between people’s decision to buy and the data feeding into the statistics.

“We know that agreed sales have been dropping for months, so there’s a good chance this will manifest itself in lower completion numbers over the next few months,” she said.

Alongside inflation, the housing market is still in the midst of a supply shortage which is driving up demand.

“It puts buyers in the miserable position of having to pay a huge premium for a home that they’ve had to settle for, which is going to put some of them off,” said Coles.