The average house price rose £17,000 to hit £310,000 in England, £217,000 in Wales, £185,000 in Scotland and £175,000 in Northern Ireland, according to the January Office for National Statistics (ONS) house price Index.

Price inflation in Scotland plummeted to 1% at the start of the year, down from almost 14% in April 2022.

The ONS explained that price volatility from 2021 to 2022, following the changes to stamp duty, disrupted pricing and resulted in the eventual slowdown in house price growth from 14.1% at its peak in July 2022 to 6.3% at the start of this year.

Affordability pressure

Official figures also confirm the worsening affordability position for full-time workers buying a home in England, having to stretch to find over eight times income or just over six in Wales last year.

The figures showed there is a patchwork of affordability issues, however, with ability to meet prices actually improving in 71% of local authorities, where inflation has stalled, worsening in 89% and staying the same in 2%, since 2021.

In 2022, full-time employees in England could expect to spend around 8.3 times their annual earnings buying a home. The equivalent figure in Wales is 6.2 times annual earnings. Over the last 25 years, housing affordability has worsened in every local authority, especially in London or the surrounding areas.

First-time buyer hopes

Conor Murphy, CEO and founder, Smartr365 and Capricorn Financial Consultancy, said: “Aspiring buyers will be pleased to see some of the heat coming out of the property market. UK homes have always been hot property for both domestic and international buyers, but even more so in the last three years due to the generous stamp duty tax break.”

He added: “Many expect the market to continue to cool off throughout the year, with estimates typically ranging between corrections of 8% from Halifax or 5% from Nationwide.

Tom Bill, head of UK residential research at Knight Frank, said: “January’s drop in annual house price growth tells us a lot about the detrimental impact of the mini Budget but very little about how the UK property market will perform this year. After effectively switching off for the final quarter of 2022, demand and supply have been solid this year and sales volumes will eventually catch up against an economic backdrop that is proving stronger than expected.”

Alan Davison, personal finance distribution director at Together, said: “With the OBR optimistically predicting inflation will fall to 2.9% by the end of 2023, we should see recent volatility across the mortgage market start to settle.

He added: “What’s more, those needing to remortgage this year may also see benefit in exploring new opportunities now, given the overall two- and five-year fixed average rates have now dropped to their lowest levels in the last six months.”