House prices rise at the fastest pace since 2007 in two-speed housing market

UK House prices rose at the fastest pace since 2007 in 2021, adding 9.8% to the average price of a home which now stands at record high £276,091.

House prices also recorded the largest cash increase since 2003.

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“UK house prices climbed again in December for the sixth consecutive month in a row, up 1.1%. The average price for a property now stands at £276,091, an increase of more than £24,500 compared to December 2020, marking the strongest year-on-year cash rise since March 2003,” said Russell Galley, Managing Director, Halifax.

“The housing market defied expectations in 2021, with quarterly growth reaching 3.5% in December, a level not seen since November 2006. In 2021 we saw the average house price reach new record highs on eight occasions, despite the UK being subject to a ‘lockdown’ for much of the first six months of the year.”

With house prices gaining at such a fast rate, some industry analysts are now questioning whether the gains can continue into 2022 given generous government schemes such as the stamp duty holiday and the end of furlough are no longer supporting the housing market.

“The big question for the housing market is not how well it performed last year but how it will perform as 2022 rings in the changes. No one expects to see the kind of price growth delivered over the last twelve months but without some major market disruptions, the stage is set for further rises,” said Danni Hewson, AJ Bell financial analyst.

However, some industry experts pointed to the UK’s high level of inflation as a possible cause for a slow down in the property market in the coming months.

“House prices scaled new heights by the end of  2021, with record prices and the kind of rapid rises we haven’t seen in almost two decades. But inflation could bring this high-speed ascent to a shuddering halt,” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.

Regional growth

There was also a word of caution around the disparity of house prices growth across the UK’s different regions and property types when looking at the headline average property increases.

Trends such as the ‘race for space’ meant there were significant increases in rural homes with gardens, whilst city centre flats flatlined, or even fell.

“The picture is not uniform across the country and across all price points however, requiring expertise to interpret the headline numbers,” said Tom Brown, Managing Director of Real Estate at Ingenious.

“For example, city centre flats in some locations don’t always reflect the same fundamentals as people search further afield for more outside space, homes with gardens, practical workspaces and quality infrastructure. When analysing residential opportunities, it is key to understand the subsectors and the regions in which they are located as it can be quite misleading to look at the market too broadly.”

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