Interactive Investor

Strongest start to the year for house prices since 2005

1st February 2022 07:22

Myron Jobson from interactive investor

interactive investor comments on Nationwide's House Price Index.

Commenting, Myron Jobson, Personal Finance Campaigner, interactive investor, says: “The gravity-defying house price growth in January is indicative of a remarkably robust property market which has powered its way through the end of the stamp duty holiday.

“A shift in attitudes towards remote working during the pandemic has transformed the property market. The ‘race for space’ which, alongside the stamp duty holiday and cheap mortgage deals, fuelled a surge in market activity last year.

“While the government is no longer asking people to work from home to help combat Covid, many employers are embracing flexible hybrid working options, which could result in sustained demand for spacious properties with big gardens outside cities. For many, it makes sense to live in a bigger place in a leafy area instead of a shoebox near work when they are not required to go into the office often.

“However, not everyone will be able to work from home every day and some estate agents have reported that city-centre flats are making a bit of a comeback now that working and commuting patterns have been formalised for many. For many workers, the housing sweet spot in the post-pandemic world would be city convenience with an abundance of green space and amenities. But the ongoing demand-supply mismatch for property - especially for family homes – has helped to prop up house prices. It also means the market could slow in the near future, with some buyers waiting for more homes to become available before making a move.

“There has been little reprieve for prospective first-time buyers. Surging inflation, which continues to outpace wage growth, the spectre of higher interest rates to combat it and the cost-of-living squeeze mean that the mountain wannabe homeowners have to climb to get on to the property ladder is getting steeper.

“For those paying a huge chunk of their income on rent while struggling to save for a deposit without the help of the Bank of Mum and Dad, the outlook is bleak.”

Key points:

  • Annual house price growth increased to 11.2% in January, from 10.4% in December
  • Prices up 0.8% month-on-month
  • Strongest start to the year since 2005

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