‘Don’t expect prices to dampen’: House price growth slows but average home now worth £276k

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House price growth has slowed down this year after four consecutive months of eye-watering gains above one percent, according to Halifax’s latest house price index. Annual house price growth remains steady at 9.7 percent with the average house price edging slightly up to hit a new record high. After almost two years of a booming property market, transaction volumes are starting to return towards pre-pandemic levels.

However, compared to last year, house prices are around £24,500 higher, and £37,500 higher than two years ago.

As the cost of living increases and with an energy bill hike on the horizon, affordability remains at a “historically low level”, according to Russell Galley, managing director at Halifax.

House price growth is continuing to outstrip people’s earnings, with younger generations likely to face “significant barriers” when it comes to owning a home and finding a deposit.

Mr Galley continued: “This situation is expected to become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living, and rises in interest rates begin to feed through to mortgage rates.

“While the limited supply of new housing stock to the market will continue to provide some support to house prices, it remains likely that the rate of house price growth will slow considerably over the next year.”

Regions

Regionally, Wales remains the strongest performing compared to the rest of the UK.

House price inflation is slightly down compared to December, with the average house price falling to £205,253.

Northern Ireland continued to record strong price growth with prices up 10.2 percent compared to last year, giving an average property value in January of £170,982.

Scotland’s house price growth also remains strong, however, the average property price has dropped slightly to £192,698.

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Across England, the Northwest came out on top as the strongest performing region.

Annual price growth was up 12 percent with the average house price reaching £213,200.

The region has the second highest rate of annual growth in the UK.

London is still the weakest performing region in the UK.

Annual price growth has uncreased for a third straight month to 4.5 percent which is double the rate recorded in December.

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Guy Gittins, CEO of Chestertons, said London’s property market has continued to see record numbers of buyers in January.

He continued: “It’s a strong indication that the market will remain at high activity levels in the first half of this year.

“Whilst larger properties or homes with outside space remain sought-after, apartments in some of London’s more central boroughs are experiencing a steady comeback.

“This is particularly driven by professionals who are returning to the office and are seeking a home nearby.”

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com said affordability will be a “defining narrative” this year.

He continued: “High prices, coupled with rising interest rates and the soaring cost of living, mean lenders are looking at people’s finances in forensic detail.

“Even though the pandemic is now two years old, its impact on the psychology of homeowners is still only beginning.

“What people want from their homes has changed dramatically and that continues to drive demand, despite the numerous headwinds.”

Mr Boyd said there is likely to be “milder growth” this year when compared with 2021.

However, a shortage of housing stock will continue to boost prices.

Propertymark CEO Nathan Emerson said it will be interesting to see how homeowners’ confidence is affected with the recent interest rate increase and household budgets being stretched.

Mr Emerson agreed that lack of housing stock is continuing to “inflate” prices

He continued: “Our member agents are reporting that the number of offers they are receiving on properties per month can be well into double figures and that sales are continuing to be agreed at over the asking price.

“Lack of stock is an issue across all four UK nations and some agents say they are as much as 40-50 percent down on last year.

“This is backed up by data in our final Housing Market Report of 2021 which showed a month-on-month reduction in the number of new instructions.

“Until that trend begins to reverse, I would not expect to see any significant dampening of property prices.”

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