According to Halifax’s latest house price index, this is the largest annual cash rise since March 2003 and the sixth consecutive month of rising house prices.
Wales reported the strongest house price growth at 14.5 per cent, with average house prices coming to £205,579. This was slightly down from the 14.8 per cent rise in November.
This was followed by North West, which came to 11.8 per cent and brings average house prices to £211,954.
The South West region reported 11 per cent house price growth with house prices coming to £287,774.
Greater London reported the lowest annual change at 2.1 per cent, with house prices brought to £525,351. This is the highest average house price in the UK.
Halifax’s managing director Russell Galley said the housing market “defied expectations” in 2021, with record high house prices recorded on eight occasions, despite the UK being in lockdown for around six months of the year.
He added that the lack of spending opportunities during lockdown had helped boost cash reserves. This along with the stamp duty holiday and race for space encouraged homebuyers to bring forward their home purchases.
The extension of the government’s job and income support schemes also propped up the labour market and heightened confidence.
Galley noted the lack of homes for sale and historically low mortgage rates had helped drive up annual house price inflation to 9.8 per cent, which he said was the highest level since 2007.
He said: “Looking ahead, the prospect that interest rates may rise further this year to tackle rising inflation, and increasing pressures on household budgets, suggests house price growth will slow considerably.
“Our expectation is that house prices will maintain their current strong levels but that growth relative to the last two years will be at a slower pace. However, there are many variables which could push house prices either way, depending on how the pandemic continues to impact the economic environment.”
Outlook for 2022
Nathan Emerson, chief executive of Propertymark, said the figures were “unsurprising” due to strong volume of demand from buyers, despite winter months typically seeing demand taper down.
He said: “We anticipate that our next report will mirror this data and continue the same trend in December, as agents on the ground report an extremely busy month in comparison to previous years.
“Movement within the market in 2022 is inevitable as many buyers continue in their hunt for a property, but uncertainty remains surrounding Covid-19 and looming restrictions due to new variants which could deter buyers from entering as soon as they would like.”
Gareth Lewis, commercial director of property lender MT Finance added that it would be interesting to see the housing market “return to a level of normality” over the next few months as government stimulation is removed.
He said: “Business has been buoyant as we start the year, with plenty of enquiries coming through. January can be quite a slow month as people gradually get back to work and find their feet but there are still motivated buyers who didn’t transact last year and are keen to do so, particularly before interest rates rise further.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said low mortgage rates had been one factor in the housing boom and although lenders had started to tweak the mortgage rates upwards, “pricing remains competitive”.
He added: “There is still plenty of confidence among buyers but perhaps now is the time to secure a cheap fixed mortgage rate to protect against the potential of further rate rises.”