The average UK house price hit £276,759 in January. That’s a fresh record, and £24,500 higher than this time last year.
That said, the rate of house price inflation showed possible signs of cooling down. The latest reading from Halifax showed that prices rose by 0.3% during the month, the smallest such increase since June 2021. That won’t be a huge comfort to potential first-time buyers, given that the annual rate of inflation still stands at 9.7%.
Cost of living crisis to weigh on house growth
Russell Galley of Halifax said that affordability remains a big issue for consumers as “house price rises continue to outstrip earnings growth”. Meanwhile, rising living costs are also squeezing the available income for servicing mortgages.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Consumers are being financially squeezed from almost all corners, with energy prices at record highs (the energy price cap increased by £693 last week), plus a national insurance hike coming in April.
Mortgages may also become at least a little more expensive – the Bank of England raised interest rates last week to 0.5% and investors are currently betting the central bank will hike interest rates at least twice again this year in a belated attempt to tackle inflation.
“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,” said Galley.
Martin Beck, chief economic advisor to EY ITEM Club, an economic forecasting group, reckons January’s slowdown in Halifax’s January reading may be a harbinger for things to come. “This year won’t see a boost to prices from the stamp duty holiday which ran through much of 2021. To the extent the tax holiday brought forward purchases, its after-effects may drag on housing market activity in the near term.”
He said expected interest rate hikes coupled with the spike in the cost of living from higher inflation and tax rises mean “it’s likely that fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates”.
But while EY Item Club expects a slowdown in the housing market, it doesn’t expect house prices to drop, because a buildup of household savings during the pandemic should offset the impact of higher costs.
“With around 80% of the stock of UK mortgage debt at fixed rates, most mortgage holders are well insulated from increases in mortgage rates in the short term,” it said.
How different regions in the UK performed
Wales recorded the strongest pace of annual growth at 13.9%, with the average house price now standing at £205,253. Northern Ireland also recorded strong growth with prices up 10.2% compared to last year, giving an average property value in January of £170,982.
House price growth cooled a little in Scotland to 8.9%, with the average property price now £192,698. In England, the North West was the strongest-performing region, with the average price up by 12% on the year, to £213,200.
While London was still the weakest-performing area of the UK, the capital continued its upward trajectory, with annual price growth rising for a third consecutive month to 4.5%. That’s double the rate recorded in December and the most robust performance in a year.
-
How Avios points work: how to collect and spend themAvios points offer worthwhile rewards for the savvy traveller. We explain how to collect, keep track of, and make the most of your Avios points
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
-
Buy-to-let returns fall 59% amid higher mortgage ratesBuy-to-let returns are slumping as the cost of borrowing spirals.
