UK housing market makes strongest start to a year since 2005

theguardian.com:

Britain’s housing market has made its strongest start to the year since 2005, with annual house price growth rising to 11.2%, according to the UK’s biggest building society.

Nationwide said the average price of a home hit £255,556 in January, the sixth consecutive monthly increase. The annual growth rate accelerated 0.8 percentage points from 10.4% the previous month, reaching its highest level since June.

Robert Gardner, Nationwide’s chief economist, said: “Housing demand has remained robust. Mortgage approvals for house purchase have continued to run slightly above pre-pandemic levels despite the surge in activity in 2021 as a result of the stamp duty holiday, which encouraged buyers to bring forward their transactions to avoid additional tax.

“Indeed, the total number of property transactions in 2021 was the highest since 2007 and around 25% higher than in 2019, before the pandemic struck. At the same time, the stock of homes on estate agents’ books has remained extremely low, which is contributing to the continued robust pace of house price growth.”

Many forecasters, including Nationwide, predict the housing market will cool later this year. Gardner noted that house price growth had outpaced wage growth by a wide margin since the coronavirus pandemic struck. For example, a 10% deposit on a typical first-time buyer home is now equivalent to 56% of total gross annual earnings, a record high. Similarly, a typical mortgage payment as a share of take-home pay is now above the long-run average despite mortgage rates remaining close to all-time lows.

While affordability has worsened, household finances have been hit by sharp increases in the cost of living. Consumer price inflation reached 5.4% in December, its fastest annual