Agents wary as house price growth slows significantly

The latest house price data from the Halifax shows another absolute record but with a sharply reduced monthly rise indicating a slowing market.

On an annual basis, the Halifax index rose by 9.7 per cent in January, the same pace as in December. However, this is lower than some analysts expected and only 0.3 per cent up over the previous month.

The average UK house price is now £276,996.

"Following the peak activity of 2021, transaction volumes are returning to more normal levels. Affordability remains at historically low levels as house price rises continue to outstrip earnings growth. Despite record levels of first-time buyers stepping onto the ladder last year, younger generations still face significant barriers to home ownership as deposit requirements remain challenging” explains Russell Galley, managing director at Halifax.

"This situation is expected to become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living, and rises in interest rates begin to feed through to mortgage rates. 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” he adds.

Reacting to the figures, OnTheMarket chief executive Jason Tebb says: “It's uncertain whether last week’s interest rate rise, coming so soon after the first rate increase in more than three years, will impact buyer confidence, particularly given greater pressure on budgets from an increase in the cost of living. But with mortgage rates still comparatively cheap and many on fixed-rate products, positive sentiment should prevail for now although it’s possible that the growth in average prices may continue to slow over the next few months.”

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We know from what’s happening on the ground that the double-whammy of rising inflation and interest rates are already prompting some who thought prices could only go one way to request valuations and make properties available for sale. On the other hand, supply still can’t keep up with demand, especially for family houses, and with around 50 per cent of homes owned outright there are many who are relatively unaffected by interest rate rises.”

Tom Bill, head of UK residential research at Knight Frank, adds: “The high level of market valuations requested by prospective sellers in January indicates that supply will pick up as more owners decide now is the time to act and we expect prices to calm down in coming months … This year could see high demand more evenly matched by supply, which would mean UK house price growth ends 2022 in single-digits.”