The ONS House Price Index shows that there was a £27,000 increase and a 10.8% rise compared to a year ago.
House prices also rose across all four nations. Data from the ONS revealed that average house prices reported the greatest increase over the year in Wales to £205,000 (13.0%), followed by Scotland (£180,000, up by 11.2%).
In England and Northern Ireland property values increased at the same rate (10.7%), albeit at a different price level. In England to £293,000 and in Northern Ireland to £159,000.
By contrast, London continued to be the region with the lowest annual growth at 5.5%, although it also boasted the highest average house prices in England.
In response to the figures, Paul Stockwell, chief commercial officer at Gatehouse Bank, said the housing market was “beginning to look out of place” with the wider economy as prices soared again (inflation in the UK rose to a 30-year high of 5.4% in December, edging up to 5.5% in January).
Read more: Interest rates set to hit highest levels in 13 years – HSBC
Stockwell said: “Persistent strong demand to move home, coupled with low supply, meant house prices soared again at the end of last year, but the housing market is beginning to look out of place with what is happening in the wider economy.
“Buyers continue to bid up the price of homes despite the cost-of-living squeeze, and there remains a strong pipeline of future borrowing, with mortgage approval rates recorded by the Bank of England last December still surpassing pre-pandemic norms.
“It’s a sign that buyers have a lot of faith in the resilience of the property market, and believe housing continues to offer a great deal of financial security, even at a time of wider economic uncertainty.”
Charlie Blagbrough, policy manager at the Building Societies Association (BSA), said demand could flatten as prospective buyers waited for inflation to peak in the coming months, adding that first-time buyers might be able to get on the housing ladder if prices reacted the same way.
He said: “There are many factors at play in the housing market with continued demand for homes and the constrained supply tending to drive prices up.
“If reports of an increase in valuation leads does generate more supply, prices are likely to flatten, which would be welcome for many, particularly first-time buyers. Although mortgage rates remain low by historic standards, the general increase in the cost of living may see the number of housing transactions flatten as potential buyers choose to wait to see if the Bank of England prediction of inflation peaking in April (at 7.25%) is correct.
“While Help to Buy is continuing to wind-down over 2022, we are seeing private sector schemes such as Deposit Unlock gain traction. Government’s flagship First Homes scheme, which will provide a discount of at least 30% of market value, is starting to scale up and will provide another route into home ownership for first time buyers.”
Read more: Supply crunch – house prices up 7.7%
Clare Beardmore, head of broker and propositions at Legal & General Mortgage Club, said she was not surprised that demand for property had continued to run high, despite “the usual slight slowdown in activity around Christmas”.
She said: “The past two years have dramatically changed what people want from their homes, and these new-found preferences are still supporting high levels of transaction activity. Of course, price growth remains underpinned by a chronic lack of supply, creating a fiercely competitive market for house-hunters.
“These themes are likely to continue to dominate the market in 2022. While tax rises and rising inflation have begun to squeeze households’ spending power, the market has shown over the last few years that it can remain resilient, even in the face of unexpected headwinds.
“Although some lenders are starting to shift mortgage rates upwards, pricing remains competitive, and many borrowers would benefit from speaking to an adviser to weigh up their options. Doing so could help them secure a deal that is well-aligned with their circumstances and safeguards their finances.”
Colin Bell, the co-founder and COO of mortgage lender Perenna, said that while the latest figures were good news for existing homebuyers, it was bad for first-time buyers and home movers, and urged the sector to rethink how it could support these two groups “to ensure homeownership remains a viable goal for all, rather than a few”.
He said: “First-time buyers or home movers are already battling record inflation and rising interest rates in their bid to step on to the property ladder or move home.
“Offering more high loan-to-income and low deposit mortgages will go some way to help these underserved borrowers. And allowing people to move home and trade up will release properties for first time buyers as well.
“Periods of high inflation remind us of the value in the peace of mind offered by long-term fixed repayments – as such, I think 2022 will be a watershed year for homeowners locking into long-term deals.”
By contrast, Conor Murphy, CEO and founder of Smartr365 and Capricorn Financial Consultancy, said house price appreciation was “not a cause for concern”.
He said: “House prices edging on the higher side is not a cause for concern – in fact, this is good news for existing homeowners and the broader market, as it is a reliable sign that demand is robust. Alongside high buyer interest, the market is buoyed by modest interest rates and strong mortgage availability.
“With demand both strong and stable, the market should focus on driving efficiency gains so that its growth is not limited by day-to-day road blockers. Letting tech take the heavy lifting in terms of admin is key to helping as many borrowers as possible get their foot on, or continue climbing, the property ladder.”
Chris Hutchinson, CEO of fintech company, Canopy, expressed more concern, saying that inflationary pressures would “continue to weigh heavy on individuals” as the cost of living took an increasing toll on households.
“While homeownership may have felt out of reach before, it could now feel a million miles away as many feel stuck in a cycle of renting spending a large chunk of their salary each month on rent.
“It is therefore more important than ever that the Government and the housing industry work together to encourage positive financial habits from the moment people begin renting. The increasing cost of living is bringing more challenges to the table for potential homeowners in an already fiercely competitive market. Building a stronger credit score and financial resilience will be vital to ensure an edge over the competition.”
