House prices soar in January – but warning property market could slow later this year

The UK property market has had a strong start to the year, with the fastest house price growth since 2005.

According to Nationwide’s house price index, house prices rose 11.2% annually in January 2022, compared to 10.4% in December 2021.

Last month the average price of a property in the UK was £255,556, up 0.8% from £254,822 in December.

But real estate experts have predicted the housing market will slow later this year due to affordability.

READ MORE: First-time buyers should watch out for these red flags when viewing a home

Nationwide has now warned that reduced housing affordability is likely to dampen market activity and property price growth – as household bills are also increased by the wider rise in the cost of living .

Robert Gardner, Nationwide’s chief economist, said: “Annual house price growth accelerated to 11.2% in January, the fastest pace since June last year and the best start to a year for 17 years.

“House price growth has significantly outpaced earnings growth since the start of the pandemic and as a result housing affordability has become less favorable.M

“Although the outlook remains uncertain, the housing market is likely to slow this year.”

Gardner said current housing market prices are making it increasingly difficult for first-time buyers to secure a home.

“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,” he explained.

“Similarly, a typical mortgage payment as a share of take-home pay is now above the long-term average, despite mortgage rates remaining near historic lows.

“Reduced affordability is likely to have a dampening effect on market activity and house price growth, especially as household finances are also under pressure due to sharp increases in the cost of life.

“Consumer price inflation hit 5.4% in December, its fastest pace since 1992.

“This is more than double the Bank of England’s 2% target, and inflation is expected to rise further in the coming months as the energy price cap rises.”

Manchester Mortgage Brokers reacted to the latest National House Price Index and shared their views.

Based in Manchester Jamie Thompson fromJamie Thompson Mortgages “Around Manchester I see as many first time buyers as there have ever been, but they are trying to buy as few properties as there seem to have ever been.

“It’s probably because everyone above them on the scale who could have moved this year advanced their steps to before September 2021 due to Rishi’s super slash on the rights of stamp.

‘The stamp duty holiday has now driven prices up to a level sadly higher than many first time buyers. Another government scheme gone awry.’

Rob Peters, director of Altrincham-based Simple Fast Mortgage, said: “While 2022 may see more reasonable levels of property activity, it will take a tsunami of interest rates to discourage home buyers.

“At the end of the day, people need homes, and since there aren’t enough homes, demand will remain high and property prices will continue to rise. Lifestyle movers might decide to don’t move, because they don’t really need it anyway.

“First-time buyers and those who have welcomed a confined baby into the household will continue to look for new homes.”

Penny D. Jackson