UK house price inflation at +7.8% Average UK house prices rose by 0.9% in the three months to January, taking the rate of annual growth to 7.8%, down from 8% in December.

Price growth gained momentum during most of 2021, after one of the busiest years the market had ever experienced. But with the lowest level of quarterly house price growth since August 2020, there are signs now that price growth is starting to ease, although the path will not be linear.

Price growth was spurred during 2021 due to the pandemic ‘reassessment of home’ driving demand among buyers and owners wanting to live elsewhere or in a home with different space. In addition, the stamp duty holiday running from summer of 2020 to autumn last year also boosted demand and eroded supply. The market is highly localized, however, with price growth ranging from 16.6% in Powys in Wales to -2.2% in the City of London. Affordability, working practices and property type are all factors in the range of value growth over the last two years. Liverpool leads the city growth at 10.3%, with price declines of -0.3% in Aberdeen.

New supply of homes for sale gathering momentum The imbalance between buyer demand and supply is not going to unwind in the near term. As can be seen in the chart , in late February, buyer demand for homes was 70% above the five-year average, and the total stock of homes available for sale was 43% lower. However, the recovery in the levels of new supply is gathering momentum.

In January and February, new listings were up in every part of the country compared to 2021 as more movers, and landlords, listed their homes for sale. The UK was in lockdown in early 2021, which means the annual comparison is flattering. But what is also telling from the chart above is the relationship between listings early this year and the longer-term trend before the pandemic. In several regions, including Scotland, the East Midlands, the North East and Yorkshire and the Humber, new listings over the last two months exceeded levels seen in 2017-2020 over the same period, signalling a turnaround in supply. New listings were broadly in line with longer-term trends in the North West and the West Midlands. In the South West and Wales, where there are larger disparities in listings numbers in January and February compared to before the pandemic, home values are seeing the biggest annual rises, with higher levels of demand and that lack of supply pushing up pricing. When it comes to the type of properties being listed, there will be welcome news for markets with high concentrations of families moving, as there has been an annual rise of more than 10% in new listings for larger three and four-bed detached homes. In fact new supply across all of the most common property types have risen year on year, meaning more listings in the last two months than in the same period in 2021.

Executive summary

•  Average house prices rose by +7.8% in the year to January, taking the average house price to £244,100
• Wales registers highest regional price growth for the 11th month at 11.7%, while London price growth slowest at 3.1%
• There are good signs for future stock levels, with new supply running ahead of 2021 levels in every region
• There has been a particular rise in family homes listed for sale
• We continue to forecast an easing in price growth during 2022
• The new year surge in buyer demand is starting to ease, albeit at a modest pace however, there are good signs for future stock levels, with new supply running ahead of 2021 levels in every region
• We continue to forecast an easing in price growth during 2022
• While new supply is starting to turn, the speed at which the market is moving means that in January, around a half of properties that sold progressed from listing to sale agreed within three weeks.
• In comparison, last year, around a third of properties progressed this quickly through the purchase process. 
• The market moves more smoothly when there is choice for buyers, so the rebuilding of pipelines is positive as movers are more willing to list homes when they can find a property to move to.
• Changing sentiment in the market as a result of the evolving economic conditions, would cause another slowdown in listings as potential movers, sellers, adopt a ‘wait and see’ approach. But in the face of such high demand, including from first-time buyers who do not need to sell, there will still be the opportunity to secure transactions.
• This year, rising economic headwinds, including the increasing cost of living and rising mortgage rates will start to put the brakes on house price growth.
• The global uncertainty and volatility resulting from the invasion of Ukraine will have economic impacts around the world, including the UK. We continue to expect 1.2 million home sales this year, down from 1.5 million in 2021, and that average house price growth will be between +2% and +4% at the end of the year.

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