According to Nationwide’s house price index, month-on-month this was a 0.8 per cent rise, which is the sixth consecutive month of increases.
The report added that the annual house price growth in January was the strongest since June last year, where a change of 13.4 per cent was recorded.
Barring October last year, annual house price growth has been in the double digits every month since May 2021.
Robert Gardner, Nationwide’s chief economist, said housing demand “remained robust” and mortgage approvals for house purchase have continued to be slightly above pre-pandemic levels, despite the stamp duty encouraging buyers to buy earlier.
He added that the total number of property transactions in 2021 was the highest since 2007 and up by a quarter on 2019.
However, he warned that the housing stock remained “extremely low” which acted as a catalyst for the “continued robust pace of house price growth”.
Gardner said it was likely that the housing market would slow this year, as house price growth has continued to outstrip earnings, leading housing affordability to become more stretched.
He added: “Reduced affordability is 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 said inflation, pegged at 5.4 per cent in December, which is more than double the Bank of England two per cent target and fastest pace of growth since 1992, had dented consumer confidence but “done little to dent housing market activity”.
Gardner explained: “High inflation and growing confidence that the Omicron variant will not derail the wider economic recovery has led to increased expectations that policymakers will increase interest rates further in the months ahead.
“This will further reduce housing affordability if it feeds through to higher mortgage rates, although to date a significant proportion of the rise in longer term interest rates seen in recent months has been absorbed by lenders.”
Strong start to the year
Brokers agreed that the report showed the year was off to a good start, with demand from buyers still strong and the housing market still reporting month-on-month growth.
Tomer Aboody, director of MT Finance,said: “A strong start to 2022 with the overflow of deals which didn’t transact in December continues the trend of the extraordinary past 15 months or so, with near continuous growth month-on-month.
“There’s still huge demand from buyers who are taking advantage of the low interest rate environment and stretching themselves to get their dream home.”
He noted: “However, with interest rates expected to increase along with inflation, impacting disposal income and deposits saved by buyers, the market is likely to slow down this year as affordability gets tougher.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the report confirmed what they had been seeing on the ground, which is a “resilient market with prices still rising in response to improving but continuing low stock levels”.
He added: “Looking forward, higher interest rates and inflation will inevitably have some impact on the pace of price increases and number of transactions.”
Mark Harris, chief executive of SPF Private Clients, said confidence in the housing market “remained unabated” despite an interest rate rise in December and another expected this week.
Harris said: “Even as mortgage rates edge higher, they are still competitively priced, which should give buyers confidence to take the plunge, even in the face of higher living costs. With several lenders introducing longer-term fixed-rate mortgages, or tweaking existing products to make them more attractive, there is plenty to tempt borrowers looking for protection against further interest rate rises.”
