Demand for homes still outstripping supply - for now

Another day, another house price index record.

The latest, from the Halifax, shows that typical house prices increased by over £24,500 in 2021, the largest annual boost since March 2003.

Wales remains the strongest performing location with annual rises of 14.5 per cent, and Northern Ireland on 10.6 per cent. Scotland was up 9.7 per cent. 

In England, the North West was the strongest performing region (up 11.8 per cent) followed by the South West. London continues to lag, up just 2.1 per cent. 

“UK house prices climbed again in December for the sixth consecutive month in a row, up 1.1 per cent” explains Russell Galley, the managing director of the Halifax. 

He continues: “In 2021 we saw the average house price reach new record highs on eight occasions, despite the UK being subject to a ‘lockdown’ for much of the first six months of the year.

“The lack of spending opportunities afforded to people while restrictions were in place helped boost household cash reserves. This factor, alongside the Stamp Duty holiday and the race for space as a result of homeworking, will have encouraged buyers to bring forward home purchases they’d maybe planned for this year. The extension of the government’s job and income support schemes also supported the labour market and may have given some households the confidence to proceed with purchases.

“A lack of available homes for sale, and historically low mortgage rates, have also helped drive annual house price inflation to 9.8 per cent, its highest level since July 2007."

Nathan Emerson, chief executive of Propertymark comments: “This is unsurprising due to the volume of demand from buyers remaining strong at a time when historically, during winter months, demand tapers down.

“Our housing market report for November revealed a 12 per cent increase in the average number of registered buyers, but the lowest number of homes on the market per branch ever recorded. This indicates fierce competition for buyers as there continues to be a huge gap between supply and demand.”

Guy Gittins, chief executive of estate agency Chestertons, adds: “We predict the imbalance between supply and demand to remain, creating a continuously competitive market for house-hunters.”

And Martin Beck, chief economic adviser to the EY Item Club, comments: “A fall in mortgage approvals in late 2021 to pre-pandemic levels suggests that the end of the stamp duty holiday in October has prompted a return to more normal levels of housing market activity and demand.

“The Bank of England’s decision in December to raise bank rate will feed through into higher mortgage rates and is likely to be followed by further interest rate increases later this year.

“Households’ spending power is being squeezed by rising inflation and faces further pressure in the spring from tax rises.”