The average house price at £244,100 in January, up 7.8% in a year, according to the latest house price data from Zoopla.
This is down from 8% in December, and the three-monthly rise is at its lowest since August 2020.
Part of this was because there were more properties on the market – 5% more than the five-year average – which meant more choice for buyers and fewer bidding wars.
Grainne Gilmore, head of research at Zoopla, said: “The sheer level of activity in the market in recent years eroded the stock of homes for sale.
“But the data indicates that more homes are now coming to the market, as movers and other owners list their properties for sale – and this will create more choice for the many buyers active in the market.
“However the imbalance between high demand and supply will take much longer to unwind, and this imbalance will continue to underpin pricing in the coming year.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, added: “The housing market was a flurry of activity in January and February, with a surge of sellers hammering in a new for sale sign and desperate buyers snapping them up sharpish. It was the busiest start to the year in six years, but it’s unlikely to last.
“The New Year saw a surge of sellers keen to make a new start. There’s a good chance that some of this was driven by the rate rise in December, and the worry that if they didn’t hurry up and make a move, they’d end up paying much more for a mortgage on their new home a few months down the line.
“Buyers, meanwhile, have been desperately waiting for new stock, so were poised to snap them up. Half of the homes on which sales were agreed were snapped up within three weeks.
“But this is likely to be a short-lived phenomenon, because buyers are coming under increasing pressure.
“Even if they decide they can take the interest rate rises in December and February on the chin, rising prices may be enough to cool their enthusiasm.
“With much higher energy bills hitting the nation’s doormats, the cost of filling up at the forecourt soaring, and higher prices on everything from food to furniture, there will come a time when a bigger mortgage feels like a step too far.
“The war between Russia and Ukraine will have a major impact too, both on sentiment and on pushing these prices even higher. It could be the final burden that buyers decide they can’t bear, which calms the January flurry to barely a flutter as we go further into 2022.”
Further reaction
Emma Cox, MD of Real Estate at Shawbrook:
“Current uncertainty, coupled with rising inflation and rapid cost of living increases, is certainly making life harder for potential buyers.
“They are facing stiff competition up and down the chain, not helped by strong demand rooted in a lack of quality supply. This has driven asking prices to record highs, with only the Treasury enjoying the additional stamp duty that buyers are incurring.
“It is important that the government’s £1.5bn Levelling Up Home Building Fund is put to good use, and fast. The property market needs an influx of quality, affordable housing to help rebalance the market and make it more accessible for all.
“It is, though, a more favourable market for those in the Private Rental Sector, with landlords in a good position to take advantage of the current landscape and add to portfolios in popular areas. Locking in a competitive mortgage rate now can go some way to combat future interest rises and increasing cost of living rises.”
Chris Hutchinson, CEO of Canopy:
“The UK housing market was turbulent long before the pandemic, however the last two years has supercharged the discrepancy between house prices and affordability. Hopeful buyers, who have now been plunged into the middle of a cost of living crisis, are running out of options when it comes to getting on the housing ladder. Their current living costs at odds with saving the necessary funds for a deposit.
“At times like this, it’s important that positive financial habits are encouraged. For renters who have to hit monthly payments, it is essential they track each payment towards their credit score. In a fiercely competitive market, ensuring you have the edge over the competition by being in the strongest position possible for affordability checks will be vital.”
Paul Coss, co-founder of Haysto:
“Potential homebuyers continue to have obstacles thrown at them as yet house prices continue to rise. Making the step onto the property ladder was already a difficult enough process, but now raising the additional funds, while the cost of living soars, is making the process seemingly harder than ever. Many already think that homeownership is nothing more than a pipedream.
“Faith in the possibility of owning your own home, especially for those that may be in adverse credit situations, seems to be at an all time low.
“And it can often feel as though no one is on your side. But, it’s important to know that there is someone in their corner ready to help. People’s financial circumstances are very rarely straight-forward and more often than not people have more complex financial situations. Not fitting the mould shouldn’t crush the dream of homeownership.”
