Despite it being the closing days of the festive season mortgages professionals have been quick to react to the latest house price index from Nationwide.
The index warned that despite record double-digit growth the market is facing a period of cooling with Robert Gardner, Nationwide’s chief economist, describing the outlook for 2022 as “extremely uncertain”.
Here are some of the key takeaways from the index (full index can be found here):
- Annual house price growth increased to 10.4%, from 10.0% in November
- 2021 was the strongest calendar year for house price growth since 2006
- Price of a typical UK home hit record high of £254,822, up nearly £24,000 over the year
- Wales was the strongest performing region in 2021, London the weakest
Here’s what the experts had to say…
Karen Noye, mortgage expert at Quilter:
“Today’s Nationwide House Price Index shows house prices continued to grow in December, with growth remaining in double digits at 10.4%, up from 10.0% in November. While still elevated, growth remains considerably lower than the high of 13.4% reported by Nationwide in June.
“According to this morning’s data, 2021 has been the strongest calendar year in terms of house price growth performance since 2006. Considering the impact of the government’s stamp duty holiday, as well as the race for space and low interest rates, it comes as no surprise that 2021 has seen such strong performance.
“As we move into 2022 – and away from the whirlwind property market seen throughout 2021 – we are likely to see a slowdown in property prices and transactions, particularly if the Bank of England further increases interest rates. While we may see the property market slow, this does not mean buying a home will become instantly more affordable. Alongside the already inflated housing market, mortgage rates have increased following the BoE’s rate rise, and as inflation does not appear to be slowing, costs will likely continue to rise.
“Increased mortgage costs coupled with the uncertainty surrounding the Omicron variant could well make people think twice about moving home and we could see a break in house price growth as a result. However, supply vs demand issues persist, so we are likely to see a gradual slowing of growth as we head into 2022 as opposed to a sharp drop.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“Even though the Bank of England finally made its move and increased interest rates in December, confidence in the housing market continued unabated. Although the last month of the year tends to be quieter for the market as people wind down for Christmas, there was still plenty of interest in buying homes and more demand than supply pushed house prices up further still.
“‘As we head into a new year, mortgage rates remain competitive and lenders keen to lend. Buyers will need all the help they can get as affordability becomes more stretched than ever and with the Bank considering easing stress testing rules for first-time buyers, this will help. With lenders enhancing criteria, some considering higher loan-to-incomes and others helping first-time buyers onto the ladder, the market should remain brisk as we head into January and beyond.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“The Nationwide survey not only demonstrates the underlying strength of the market after the withdrawal of the stamp duty holiday and furlough but gives a broad hint of the direction of travel for 2022.
“‘We are seeing much the same at the sharp end, too, including in the run up to Christmas with rising Omicron cases, inflation and interest rates resulting in reduced activity but not a significant correction.
“Further Covid restrictions will only lead to a build-up of more pent-up demand. But momentum will continue to be compromised by lack of supply as we have found sellers tend to be more put off than buyers because they are concerned about having people in their homes for viewings.”
Gareth Lewis, commercial director of property lender MT Finance:
“The year finished on a high as far as the housing market is concerned, and in the most unpromising of circumstances given the global pandemic.
“Covid focused the minds of buyers like nothing else, persuading people to move further out of urban centres in the search for more space, aided by remarkably low mortgage rates. Unsurprisingly, house prices performed most strongly in Wales, the north of England and the south-west as working patterns changed.
“However, affordability in London remains incredibly stretched, making it very difficult for a young workforce to buy in the capital.
“Although many people have made their move, there is still plenty of pent-up demand, which will keep property prices high. An easing of stamp duty for downsizers looks increasingly necessary in order to encourage them to move, free up larger family homes and keep property price growth at a more manageable level.”
Nicky Stevenson, managing director at national estate agent group Fine & Country:
“To close out the year at an all-time high on a wave of double digit annual growth sums up what has been an unstoppable rally that has surprised at every turn.
“Earlier this year, the performance of house prices was being described as a ‘mini-boom’ but the market has substantially outgrown that moniker now. The rally still hasn’t run out of steam, with buyers in December shrugging off the rise of Omicron and a rise in central bank interest rates.
“There are two main headwinds on the horizon, as Covid fears begin to ease. The first is inflation and the unpredictable pace at which the Bank of England will raise rates. Given property transactions are relatively slow affairs, this is one of the more difficult nettles to grasp for buyers who are stretching their budgets and trying to plan ahead. This affects those buying at the top end of the market as much as it does first-time buyers.
“The second is consumer confidence. In the shadow of Covid, the UK has dodged an economic day of reckoning so far, largely thanks to government support, but there’s plenty of uncertainty left to navigate in 2022 from employment prospects and wage inflation to new Covid variants and rises in the cost of living.”
Iain McKenzie, CEO of The Guild of Property Professionals:
“The property market ended 2021 on a high, and it’s incredible to think that average house prices have soared almost £24,000 this year.
“This was the year that Britons took stock and decided it was time to find their dream home, and the trend shows no signs of slowing.
“Mortgage approvals are still well above pre-Covid levels, and with demand outstripping supply, prices are still being pushed up.
“We expect 2022 to start the same way, with fears over the Omicron starting to subside. Buyers will have one eye on soaring inflation, but the housing market continues its upward climb.”
