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House price growth slows as supply moderately recovers

Paloma Kubiak
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Paloma Kubiak

The supply of new homes coming to market ran 5% above the five-year average and choice started to return.

There was a slight dampening in house price growth in the year to January as it rose 7.8% to £244,100. This was compared to the 8% growth recorded in December, according to Zoopla’s house price index.

Zoopla said this was “highly localised” as Powys in Wales recorded a 16.6% increase compared to London’s negative 2.2%.

New listings

In the first two months of the year, new listings increased for every property type compared to 2021. The rise in newly listed homes was most evident in the supply of three and four-bed detached homes, with a 13% increase in three-bed detached homes and an 11% uptick in four-bed detached homes.

The listings for one-bed flats rose 9% compared to last year, while two-bed flats increased by 5%.

Homes selling fast

Zoopla said demand for housing resulted in the busiest start to the year since 2016 with sales agreed matching levels seen in 2021.

Almost half of all homes listed in January where sales were agreed were purchased within three weeks of coming to market, up from the third of homes which progressed from listing to sale agreed during the same period last year.

Larger homes drove the market with three-bed houses outside of London proving the most popular and taking just 23 days to sell. Zoopla said this made these properties the fastest selling type in the UK.
In contrast, two-bed flats in London are taking twice as long to sell at an average of 53 days.

Looking ahead, Zoopla still expects 1.2 million homes to be sold this year down from 1.5 million in 2021 and average house price growth will be between two and four per cent by the end of the year.

Grainne Gilmore, head of research at Zoopla, said: “The sheer level of activity in the market in recent years eroded the stock of homes for sale. But the data indicates that more homes are now coming to the market, as movers and other owners list their properties for sale – and this will create more choice for the many buyers active in the market.

“However, the imbalance between high demand and supply will take much longer to unwind, and this imbalance will continue to underpin pricing in the coming year.”

She added: “Even so, we expect the rate of annual house price growth to ease over the course of 2022, as economic headwinds, including mortgage rate rises and the rising cost of living, put the brakes on price rises.”

Activity unlikely to last

Guy Gittins, chief executive of Chestertons, said: “Last year, we saw house hunters feeling left in limbo as the impact of the pandemic created a strong sense of economic uncertainty. Since then, buyer confidence has returned and there has been a drastic increase in demand for houses and apartments alike.”

Gittins said to see new buyer enquiries at this level at the start of the year was “truly remarkable” and an indication of a buoyant market for the first half of the year at least.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “House price growth continues to exceed expectations, powered by robust demand. While the escalating cost of living crisis and the spectre of higher interest rates are likely to exert a cooling effect on the housing market, the demand for property could grow further still if proposals to unwind the tough mortgage affordability tests, implemented in 2014 to prevent a repeat of the financial crisis, see the light of day.

“If green lighted, the proposals could do wonders to buyers’ affordability position, allowing them to secure a home loan at a higher multiple of their salary. But it could also add to the demand supply imbalance for property – thus driving prices higher. It could be a double-edge sword. In any case, borrowing more could add further pressure on budgets amid the current period of uncertainty for personal finances.”