Last year saw the highest rise in property prices since just before the big recession in 2006. By December 2021 they were up 10.4 per cent annually, bringing the cost of the average home to £254,822, according to figures from the Nationwide Building Society.

That annual price rise of £23,902 was in direct opposition to what was happening with the rest of the UK economy. In fact, house prices went up far higher than household incomes did (the highest discrepancy since 1983, in fact). 

Omicron boosts house price growth

Repeated lockdowns and Brexit cast negative effects on thousands of companies, many of whom are still struggling to survive – especially with the onset of Omicron. 

The variant helped to boost house prices too, with many householders reluctant to put their property on the market in December for fearing of contracting the virus.

A spokesman for upmarket estate agents Savills said they have predicted a UK-wide 3.5 per cent rise in property prices for the whole of 2022. But that is only on condition that the pandemic-induced demands for more space and a more rustic or coastal setting abates. Probably the biggest effect on house prices this year will be whether or not the gap between buyer demand and property supply grows or shrinks.

Zoopla’s analysts agree this year’s property price growth will be around the three per cent mark. Director of research, Richard Donnell, reckons there will be around 1.2m property transactions this year (compared to 1.5m in 2021). Big growth areas, he surmises, will be the east Midlands and north-west England. 

Chief lenders at the Halifax are more cautious about house price growth, predicting just a one per cent rise over the next 12 months.

Average first deposit in London is £88,000

London is expected to remain in the doldrums with lower growth of 2%. Perhaps the figure for the capital isn’t surprising when you consider that the average 20 per cent deposit for a first-time buyer in London is £88,000. The sum was calculated by Nationwide in their December report and works out at 183 per cent of average gross income per annum.

Property in Wales sees biggest price rise

Of the four nations, Wales had the biggest house price rise last year. Figures from the Office of National Statistics showed an annual jump of 15.5 per cent in October year-on-year, bringing the value of the average property in the country to £203,224. Homes at the higher end of the market were particularly popular, with one Savills estate agent saying quadruple the number of homes worth at least £1million exchanged hands last year, compared to pre-pandemic levels.

In Scotland the figure was 11.3 per cent, bringing the cost of the average property to £181,391. Northern Ireland, there was a 10.7 per cent increase, resulting in an average £159,109 figure. England was the lowest at 9.8 per cent (lower, in fact, than the UK-wide price rise figure of 10.2 per cent), with the cost of the average property in England – excluding London – hitting 285,113.

Flats are back in demand, as more people slowly start to go back to work in cities. 

Rightmove says city apartments were the most searched for properties on its portal during autumn. Analysts say the figures appear to show that prospective house hunters’ demands for more space and greener pastures is coming to an end – or at least slowing down significantly.

The statistics were revealed prior to the latest omicron spread. But it is still a sign that the market was reverting to ‘normal.’ Certainly, buyers were beginning to look to cities again, with hybrid working beginning to replace working from home.

“Although there was less demand for flats when the market reopened, with more availability than other property types, and more steady average asking price growth over the last year, flats could be a good opportunity for people looking to move or to get on to the ladder next year,” said Tim Bannister, Rightmove’s director of property data. 

Flats increase in value more than detached houses

Figures from high street lender Halifax paint a similar picture, with flats selling for 10.8% more in November compared to the previous year. Prices for detached houses had increased too – but at 6.6%, the rise was less than that for flats.

Halifax predictions are for a slowing down in price rises next year due to increased inflation affecting household incomes.

According to the government’s Office for National Statistics UK inflation was the highest for a decade at 5.1% in November.

Londoners spend record sum moving out of city

Other figures – this time by Hamptons – show that Londoner’s spent £54.9bn on properties outside of the cities this year. That was equivalent to 112,000 properties and was an increase of 62% on the previous year. The average price of property in London has increased by almost £36,000 over the last year with the figure now at £486,890. 

Mortgage lender offers seven times salary

With the easing of restrictions on the amount of money lenders could offer borrowers recently, one lender has announced particularly generous terms. Habito has said it will lend borrowers a mortgage sum of up to seven times their salary. 

If it’s a joint application then one person will have the seven multiple, while the other’s salary will be capped at five times their income. The main stipulation is that the Habito One mortgage is a fixed deal – for up to 40 years. Interest rates start at around 2.99%.

The typical borrowing rate at the moment is 4.5 times a salary although it has edged up to 5.5 times for borrowers at Halifax and HSBC.

To qualify for the Habito ‘seven times salary deal’ borrowers must work in particular professions, such as nursing, teaching, the police or fire service, and have a take home salary of around £25,000 per annum. They will also need to put down a 10% deposit.

One analyst warned that allowing borrowers to take out bigger sums could lead to a rise in house prices “in the same way the stamp duty holiday did.”

By the end of the year, one in 16 private households will have moved home – that’s how busy the UK housing market has been in 2021. 

It’s the busiest, in fact, for 14 years, according to Zoopla. But then, never before has there been such an influence on home-working, thanks to the pandemic. For those who like statistics, analysts predict reckon this year’s frenetically-paced housing market will have recorded 1.5 million housing completions by December 31.

The property portal also calculated annual house price rises at 6.9% in November, with the average property having gained £15,000 in value over the course of the year. Nationwide’s Housing Index put growth even higher – at 10% annually (that was an increase on October’s 9.9%). The high street lender records the cost of the average UK property at £252,687.

Sales slumped by more than half in October

The November increase in property values is despite the fact sales plummeted to half that of the previous month in October (52% less, according to official HMRC figures) as people rushed to complete transactions prior to the Stamp Duty deadline.

In fact, Bank of England figures show mortgage approvals were the lowest in October since July 2020. 

And, with interest rates expected to rise next month, will sales start to dry up and prices stabilize? Tom Bill, head of UK residential research at the Knight Frank believes so. 

 “Gravity-defying price growth is the result of low interest rates and tight supply, which are both things we expect to reverse next year, putting downwards pressure on prices,” he said.

Rival property portal Rightmove predict 2022 will see a 5% rise in asking prices, increasing the cost of the average property by £17,000. But it will be nothing like this year’s turbo rise. 

Head northwards for bigger price increases

Property in some areas will fare better than others. Right now, Yorkshire & the Humber, Scotland, the south west and the West Midlands are the hot spots for buyers. 

Central London properties picking up

London has been slow this year, with more buyers moving out rather than in to the capital. As a result, house prices have risen by an average of around just 2%. And that doesn’t look to be getting any better over the next couple of years either, with growth expected to be between just 1% and 1.5% annually. 

Only luxury properties in Central London are expected to do well next year as more international buyers appear in the capital now that the lifting of lockdown has made travel easier for more areas.

A flourishing private rental sector

And what of the private rental sector? With demand continuing to outstrip supply – especially when it comes to high-quality rental property – there is only one way that prices can go – and that’s up, of course. As a result, the Build to Rent sector, together with Purpose Built Student Accommodation (PBSA) are both proving extremely popular with investors. Lloyds bank and John Lewis are just two of the high street names having declared an interest in becoming large-scale landlords in the past year.

A super-fast internet connection can add £5,000 to the value of a property, according to more than 294 UK estate agents.

The comment came on the back of a survey which showed that a great broadband connection ie ‘full fibre’ is a main priority for many house buyers. To the extent that 34 per cent of buyers surveyed by Omdia said they wanted speeds of more than 300Mbps. Another 23 per cent are demanding 1 Gbps.

Broadband second only to property size

The main priority for house buyers, according to the survey was the size of their property (23 per cent), closely followed by 20 per cent stating that broadband quality was their number one. A further 18 per cent said they were more interested in the number of bedrooms, 10 per cent the age of the house or apartment was more important, while nine per cent said they would prioritise transport links.

“Poor wi-fi and a bad mobile signal can be a deal breaker,” admitted one estate agent, “while fibre broadband adds to the appeal.”

All homes to have full-fibre broadband by 2026

Telecoms regulator Ofcom say around 18.2 million homes (62 per cent) already have access to 300Mbps or faster, according to their research. The government meanwhile say they will fit out every home in the UK with full-fibre and gigabit-capable broadband by 2025.

A spokesman for London-based estate agent Foxtons admitted internet connections had increased in importance since the pandemic, in particular, but that buyers still valued schools and local amenities, as well as the size of a property.

Narrowing of the north-south property price divide

Meanwhile, predictions from another estate agent also made headlines this week in the property press. Upmarket Savills says it expects the north-south property price divide to narrow considerably over the next five years. 

Both areas will still see growth – albeit northern growth should be higher than southern – but overall house prices could have increased by 13 per cent by the time 2026 comes around, they say. This is broken down into 4.5 per cent for Yorkshire and the Humber and the north-west over the next year, two per cent for London and three per cent for the rest of the UK.

The north’s ‘affordability cushion’

A company spokesman said: “There remains more of an affordability cushion beyond London and the south. The government’s levelling-up agenda has the potential to accelerate a rebalancing of the market but only if it gains meaningful traction.”

Despite the bigger increases in the north, London prices will still remain far higher with forecasts of property averaging £713,987 in the capital by the end of 2026, compared to averages of £272,732 in the north-west and £266,417 in Yorkshire.

Rental growth even higher than capital increases

And it is not only capital growth that Savills predicts will rise into double digits by 2026 – rental price growth is also expected to be up. And analysts at Savills say that will outshine capital growth at 19.9 per cent by 2026.

House prices in England hit a new monthly record in September as they increased in value by 1.7% between August and last month. And that was the biggest monthly rise since just before the recession in 2007.

The figures were from the latest Halifax Price Index and were a reversal of the previous three months where property values had fallen month on month.

Property up £18,000 year-on-year in September

The 1.7% rise worked out at £4,425 added to the price of the average home in England, bringing that figure to £267,587 for September. It’s a jump of £18,000 on September 2020 when the property market reopened after the summer lockdown.

Other statistics, produced by the lender, show that the price of apartments have risen by 6.1% whereas both semi-detached homes and homes have gone up more – by 8.9% and 8.8% respectively. 

In terms of other areas of the UK, property inflation in Wales outdid all other areas, coming in at 11.5% last month. In Northern Ireland the figure was 9.3% and in Scotland prices rose by 8.3%.

South-west is England property price champ

In England, house price inflation is highest in the south-west, at 9.7%, bringing the cost of the average property there to £276,226. London, though, continues to lag behind the rest of the UK. Prices aren’t falling there anymore, but they aren’t rising as fast as the rest of the country at just 1% between August and September.

Estate agents say they are still more buyers than there are properties on the market. This brings property analysts to believe that prices, and the property market, will remain stable – despite the possibility of tax rises and inflation in the near future.

But Tom Bill, head of UK residential research at Knight Frank, refers to this property shortage as ‘an underlying weakness’ in the market. 

He said: “The imbalance between supply and demand is unsustainable and, in many cases, arises because prospective sellers are unable to find anywhere to buy themselves, creating a vicious circle of low supply. In some cases, they cannot even find properties to rent as a short-term option.”

Citing around 13 new buyers for every property listed in the UK last month, he said the last time there was such as short supply of properties was back at the beginning of 2020. In a bid to encourage house buyers now that the Stamp Duty Holiday has come to an end, mortgage lending is loosening too.

More mortgages coming onto the market

Certainly, the threat of rising inflation doesn’t seem to be having any effect on them. They offered lower interest rates in the third quarter of the year than the previous one. House deposits were lower too.

There is currently, what many in the industry would describe as a ‘mortgage war,’ taking place. Many High Street and online lenders are even vowing to introduce more mortgages until the end of next month. Most of the lending recently has been for re-mortgaging, rather than from those buying or first-time buyers (many of whom are still complaining of being priced-out of the market).

According to the Bank of England’s credit conditions survey mortgage lenders were encouraged by the improving economic outlook and rising house prices. Around 18% of them said they anticipated a further easing of credit conditions in the fourth quarter too. 

Even the prospect of what many believe will be a rise in the Bank of England’s base rate from 0.1% to 0.25%, around December, isn’t putting lenders off. Analysts say they will simply absorb the cost so that low interest mortgage deals will continue well into 2023.

The average property in the UK increased in value by £1000, last month – according to the most recent Halifax index. 

It brings the cost of the average house to £261,221. That’s £18,500 more expensive that the same time last year. July was the first month prices have been regarded since the ‘less generous’ Stamp Duty Holiday in England and Northern Ireland saw the £500,000 free tax threshold reduce by 50% to £250,000. In October it will revert to the usual £125,000 figure.

Annual house price rate falls for 2021

According to the High Street lender, the rate of increase for house prices last month was 0.4%, which was less of an increase than in July 2020. This means the annual house price increase for 2021 has fallen to 7.4%.

Russell Galley, Halifax’s managing director said he expected buyer activity to cool over the coming months, resulting in a steadier paced housing market by the end of the year. Despite this, fewer houses available compared to demand combined with continuing low interest rates means prices shouldn’t be falling any time soon – if at all.

Nicky Stevenson, managing director at the estate agents Fine & Country, said the Halifax figures showed that “the era of ballooning house prices is not over yet, even if a little air is now slowly starting to hiss out of the market.”

Greater mortgage availability and government schemes to help fund deposits were also helping to inflate prices. She added: “While annual growth has softened slightly since the frenzied heyday of the stamp duty holiday, there is still a great wall of money coming into the market despite the phasing out of this much celebrated tax break.”

This ‘great wall of money’ from affluent house owners who already have impressive amounts of equity in their existing homes, means many second steppers as well as first time buyers can’t afford to move home – certainly not at the present time. 

In fact, the price difference between a two-bedroom flat and three-bedroom house has doubled over the past decade. According to Zoopla’s figures the difference is £78,000, compared with £39,000 in 2010. 

North – South property divide widens

And, as people move towards greener spaces and bigger properties, the North and South divide continues to grow. Most popular destinations to move to judging by the rise in house prices from the Halifax survey, are the north-west and Yorkshire & Humberside. Wales also saw a large jump in house prices, with as much as 13.8%. London and the south-east, as well as the east of England witnessed far smaller house price jumps. Property in the capital was the lowest increase at just 2.5%.

House prices up 20% over five years says analyst 

Tom Bill, head of UK residential research at property agent Knight Frank expects prices to rise by as much as 20% over the next five years or so. This, he says, will be due to the fact more people will be working from home and looking for more space for their own office. He too sees continued migration to the countryside.

June 2021 was the busiest ever month on record for the UK property market.

HMRC saw 213,120 property transactions over the entire 30 days. That is the busiest since April 2005 when the government body first started recorded sales. 

The Stamp Duty Holiday helped boost the numbers in England and now although the biggest savings in stamp duty have passed, buyers can still save up to £2,500.

One senior analyst said June’s record reflected a “perfect storm of demand.” This, he said, was accelerated by “locked down buyers seeking more space.” The Stamp Duty holiday only exacerbated the situation.

Prices up 30% from previous peak

It’s not only the number of sales that are hitting records in the housing market. Prices too are peaking, with property 30% higher than the peak back in 2007, just before the markets crashed.

Zoopla recorded the average property price as £230,700 – an increase of 5.4% year on year. Meanwhile there were 25% fewer properties on the market for the first six months of this year compared to last.

Around 19 viewers for every property

As a result, NAEA Propertymark, which represents estate agents, reported that its members had approximately 19 viewings for every property on their books last month. Although this too will rebalance as the year continues, say the Association as the number of buyers declines in line with the ending of the Stamp Duty holiday in September.

In terms of cost, nearly half (40%) of properties were sold for more than the original asking price.

In Wales, property has risen by 8.4% over the past 12 months – that’s the highest growth in 16 years. In Northern Ireland it was even higher, with growth of 8.6%. 

Regionally, prices increased most in the North West (an increase of 7.3%) and Yorkshire & the Humber (up 6.8%). 

Places where property has gone up by £100,000

In terms of postcodes, there were locations were the price of a property had increased by more than £100,000 over the previous year. This is according to a survey commissioned by the Sunday Times.

It shows there are at least eight areas that qualify. These are – North Cornwall (ie Padstow and Polzeath), South Devon (Salcombe and Kingsbridge), East Suffolk, South Cornwall (eg Fowey), North Devon (Woolacombe and Croyde), Renfrewshire in Scotland (Kilmacolm) and North Somerset (Long Ashton near Bristol).

Inner London faring very poorly in comparison

Inner London as fared particularly badly over the past year. That’s for two reasons – the first being the absence of overseas buyers during the panic. The second reason is the desire to move to ‘greener pastures’ or ‘costal havens.’ Property in this luxury postcode market is actually 20% down on previous values, according to Savills. It’s believed the first reason will rebalance itself once airport restrictions on overseas visitors are lifted fully.

A Zoopla senior researcher said demand for houses was still far outstripping flats. She expected price increases for family-sized houses to continue over the coming months, peaking at 6% then falling to around 5% by December 2021.