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 homeownership 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.

we’re also seeing that supply cannot keep up with the demand we’re experiencing, often selling family homes in desirable areas in record time

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.”

Andy Butts, Group Sales & Lettings Director at Centrick commented, “Our branches are already starting to experience the effects of rising inflation and interest rates, with people who may have hesitated in previous months to speak to our teams and now invite them out for a valuation and ultimately come to market. However, we’re also seeing that supply cannot keep up with the demand we’re experiencing, often selling family homes in desirable areas in record time, without having to come to the open market. One round of phone calls to disappointed buyers from a previous property is ending up in a bidding war for the new instruction within days or hours of instruction.”

“It will be interesting to see if this slowing growth continues throughout the year as supply and demand potentially balance in the market.”, he added.