House prices get off to 'strongest start in 17 years'

House prices get off to 'strongest start in 17 years'
Photographer: Anthony Devlin/Bloomberg

Annual house price growth has continued its upward trend in January, marking the strongest start to the year for 17 years.

Annual house price growth reached 11.2 per cent in January, up from 10.4 per cent in December, according to Nationwide’s latest house price index.

The 0.8 percentage point rise also marked the strongest pace of growth since June last year, a month buoyed by the end of the stamp duty holiday.

The rise comes in spite of experts’ concerns last month that rising inflation could revert the market back to a decline.

“Annual house price growth accelerated to 11.2 per cent in January, the strongest pace since June last year, and the strongest start to the year for 17 years. Prices rose by 0.8 per cent month-on-month, after taking account of seasonal effects, the sixth consecutive monthly increase," said Nationwide's chief economist, Robert Gardner.

"Although 2022 might see more sensible levels of property activity, it's going to take an interest rate tsunami to put house buyers off,” said Rob Peters, director of Altrincham-based Simple Fast Mortgage.

“Ultimately, people need houses, and as there aren't enough houses, demand will remain high, and property prices will continue to rise.”

Last year was the strongest year for house price growth since 2006. It was also the best year for property transactions since 2007, despite a nine-year low in October.

Peters isn’t the only broker pointing to healthy buyer demand. Manchester-based broker Jamie Thompson said he was “seeing as many first-time buyers as there's ever been” around Manchester.

Whilst Rhys Schofield, managing director at Peak Mortgages and Protection, said January was “by far and away” the firm’s “busiest month ever”, with demand for property and mortgages “through the roof”.

But Gardner alongside other experts, anticipates a cooling off in house price growth over the coming months.

Gardner said reduced affordability as a result of sky-high prices was 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,” he added.

Consumer price inflation reached 5.4 per cent in December, its fastest pace since 1992.

This is more than double the Bank of England’s 2 per cent target and is set to rise further as the energy price cap is increased in April. 

Turning buyer appetite

For some brokers, January showed signs of a turning buyer appetite. Graham Cox, founder of the Bristol-based Self-Employed Mortgage Hub, said mortgage demand picked up a little in the second half of January.

“But overall,” he continued, “we're noticing borrowers are turning cautious, fearful of the economic outlook.”

Whilst he acknowledged prices would remain high as long as the housing supply crisis continues, he said all the factors on the demand side “are going in the wrong direction.