Biggest January rise in property prices since 2005

The UK property market recorded it's sixth consecutive month of increase, but the pressures are building towards the inevitable slowdown. The numbers from Nationwide and Zoopla.

January is often a slow month before the spring peak in activity. Not so this year as the rate of house prices accelerated. At the city level, it is again the North and the Midlands which are seeing the strongest gains.

Nationwide's numbers for January

• Annual house price growth increased to 11.2% in January, from 10.4% in December
• Prices up 0.8% month-on-month
• Strongest start to the year since 2005

	January 2022	December 2021
Monthly change	+0.8%	+0.8%
Annual change	+11.2%	+1.1%
Average price ​Not seasonally adjusted	£255,556	£254,822

Housing demand has remained robust. Mortgage approvals for house purchase have continued to run slightly above prepandemic levels, despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax.

​Indeed, the total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck.

At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth.

​Robert Gardner, Chief Economist, Nationwide

Zoopla/Hometrack's top 5 cities

• Buyer demand surged over the New Year, and supply remains constrained, although initial signs that this trend may be turning
• Levels of buyer demand have reached new highs for family houses and flats in the first weeks of 2022

"Demand is rising sharply for flats, with international demand, relative affordability and workers flowing back into  cities all combining to energise  this market”

	Average price	December 2021 ​y-o-y	December 2020 ​y-o-y
Liverpool	£142,000	+10.7%	+6.5%
Manchester	£199,500	+8.7%	+6.6%
Nottingham	£181,700	+8.6%	+6.0%
Sheffield	£158,300	+8.2%	+5.3%
Leicester	£207,200	+7.9%	+5.9%

Liverpool and Manchester lead the way in terms of price growth in
the UK’s largest cities, at 10.7% and 8.7%, contributing to average
growth of 9.2% in the North West. Oldham and Rochdale are also
registering growth of more than 11%.

​At the other end of the scale, London’s home values are up by an
average of 2.6%, although in a third of the city’s boroughs including
Bromley, Bexley and Havering, price growth is over 4%.

Outlook

The trend towards larger homes is set to continue for some time, but at a slower pace than seen so far, and the stamp duty holiday is now behind us. Estate agents are reporting an increase in new listings in January. If this continues, it will take some of the pressure off the supply/demand imbalance.

A factor becoming increasingly relevant is the growing disparity between property price rises and income growth. ​House price increases have far outpaced wage growth over the last year, so affordability has become stretched.

Money markets have priced in an imminent rise in interest rates. If, as widely expected, lenders increase the rate for new loans, the effect on demand will be immediate. With inflation reaching a thirty year high, more conservative lending policies may further dampen demand.

Most commentators' forecasts for property price rises this year remain in the 3% to 5% range.