House prices may only inch up by 1 per cent in 2022 following this year’s runaway inflation, according to mortgage lender Halifax.
Prices increased by 8 per cent in 2021, more than the 6 per cent recorded in 2020.
The typical home now costs £272,992 compared to £252,235 a year ago, Halifax said; a rise of £20,757.
Average property prices are also almost £34,000 higher than before the start of the pandemic, and quarterly growth was at its highest since 2006 at 3.4 per cent over the previous three months.
The runaway house price growth witnessed over the past year could slow dramatically in 2022 according to the mortgage lender Halifax, which said prices may rise just 1%
However, Halifax predicted that growth would ‘slow considerably’ in 2022 due to factors such as rising interest rates and pressure on household budgets following the withdrawal of Covid support measures, such as furlough.
It said prices would stay broadly flat, rising between 0 per cent and 2 per cent, though it admitted there was still a ‘large degree of uncertainty’ around the forecast.
House price growth during the pandemic has been driven by a number of factors.
Lifestyle changes such as working from home made people keen to move to more spacious properties, while the Government’s stamp duty holiday meant that property buyers paid less tax between July 2020 and the end of June 2021.
Fixed mortgage rates also hit historic lows this year, with deals for those with the biggest deposits going sub 1 per cent.
Quarterly house price growth has hit a high not seen since 2006, according to Halifax
However, yesterday’s Bank of England decision to increase the base rate from 0.1 per cent to 0.25 per cent is likely to see them increase.
Russell Galley, managing director of Halifax, said: ‘Looking ahead, with the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phased out, greater pressure on household budgets suggests house price growth will slow considerably.’
Affordability concerns
Slowing house price growth will be welcome news for first-time buyers, who have experienced higher than average inflation over the past year.
Halifax said properties sold to first-time buyers recorded 9.1 per cent growth in 2021, compared to 8.8 per cent for home movers.
Said Galley: ‘As has been consistent for several years pre-pandemic, the key long-term issue for the housing market remains the inequality between generations and across the income spectrum, and specifically the ability of the young and lower-paid to access good quality housing that meets their needs.
‘This disparity has only intensified over the last two years, increasing the need to prioritise improved housing availability and affordability.’
The lender also surveyed the public on the topic of house prices, and found major concerns about affordability.
Two-thirds (67 per cent) of the UK public said they did not believe the housing market was currently helping people access affordable and quality homes in their area.
Both homeowners (60 per cent) and renters (72 per cent) said house prices were the biggest issue facing the market.
And in contrast to Halifax’s forecast, two-thirds of people (63 per cent) believed house prices would continue to increase over the next three years.
