The Office of National Statistics has released figures this week showing that house prices in the UK slowed in the year up to January 2022, but also revealed that the average price of a house showed an increase of around £2,000 per month over twelve months.
In the year to January, prices rose by 9.6%, slightly down from the 10% seen up to December. Even though the pace has somewhat slowed, the dream of owning a home is becoming more and more out of reach for many people in the UK.
Potential buyers are facing the necessity of using a huge part of their pre-tax average wage to cover the additional increase in costs over the last year.
Director of research at Savills, Lawrence Bowles, commented: ‘By way of context, median annual earnings were £31,285 in 2021. This means that the increase in value of the average home was 77 per cent of total average gross earnings.’
The biggest increase in prices was seen in Wales, with a rise of 13.9%, bringing the average house price to £206,000.
Scotland saw a hike of 10.8%, followed by England at 9.4% and Northern Ireland at 7.9%. London showed the lowest increase in average home prices, at 2.2%.
The second half of 2020 and 2021 saw the UK experience a marked increase in prices, according to the ONS. This was largely due to the lack of supply of homes for sale, prompting buyers to pay more for the properties they wanted. Alongside this was the change in thought process when it came to choosing the type of property they wanted due to the pandemic and the drastic change in both home and working life.
Rapidly increasing house prices are pushing buyers to seriously stretch their finances in order to afford to buy, and with increasing interest rates, the battle is only getting harder. With the supply and demand for properties seriously imbalanced, competition is rife, and prices continue to increase, with many first-time buyers unable to get their foot on the property ladder.
The managing director at Belper-based Peak Mortgages and Protection, Rhys Schofield, warned: ‘House prices may have edged down slightly, but they’re still frighteningly high’.
‘The property market is broken, kaput’.
‘There are more buyers than houses, and any increases in interest rates are merely tinkering around the edges, as it doesn’t solve the issue around the lack of supply’.
‘The alternative to buying is renting, but when rents are going up even faster, the lack of property becomes a real issue. It’s all very well that house prices are going up, but those fortunate enough to be on the property ladder are leaving a heck of a lot of people behind.’
In England, the East Midlands saw the highest rise in prices, with a growth of 11.6% in the year to January, up from 10.4% in December.
London saw the lowest increase; however, the average home price still remains high at £510,000 in January, according to the figures from the ONS.
The North East remains the region with the lowest average home price at £151,000.
HMRC’s monthly property transaction data shows that the provisional seasonally adjusted estimate of UK residential transactions in January 2022 was 10.6% lower (106,990) than at the same time in 2021.
Seasonally adjusted monthly figures revealed an average property price increase of 0.7% from December 2021 to January 2022. The previous month saw a rise of 0.6%.
Jeremy Leaf, a north London estate agent and a former RICS residential chairman said: ‘Another day, another survey showed the resilience of the housing market despite concerns about the implications of the war in Ukraine, particularly on inflation and interest rates.
‘On the ground, existing homeowners whose purchasing power has been buoyed by savings and equity still remain keen to find homes that fit their post-Covid lifestyle.
‘Affordability is more of a factor for those buying for the first time, so it will have some impact on prices.’
It is uncertain whether prices will continue to increase as the inflation rate spirals, mortgage interest rates rise, and buyers find it more difficult to afford the increased costs.
The managing director of real estate at Shawbrook, Emma Cox, commented: ‘House prices continue to challenge any sense of normality despite rising inflation and the soaring cost of living, forcing a reality check on buyers’ budgets. Record prices and undiminished demand are putting pressure on buyers who aren’t seeing their money go as far across the board.
‘Yet, the outlook does remain positive for those looking to sell. The market remains firmly in favour of those with capital available and looking to add to portfolios or let out properties.
‘Although recent hikes in energy bills and running costs will have to be factored in, socially responsible landlords will be aware of the changes they can make to their portfolios in order to limit the impact of energy price rises in the future for tenants.’ Other data released by the Office of National Statistics showed a massive increase in the cost of living last month, with prices rising by 6.2% from February 2021 to February this year, the highest seen for thirty years. The expectation is that this figure will continue to rise over the coming year.