Prices rose sharply in January

House prices rose by 0.8% in January, the strongest start to a year since 2005, according to the latest data from the Nationwide.

The mortgage lender said the rise in the first month of the year pushed annual house price inflation to 11.2%, with average prices hitting more than £255k.

This is the highest annual inflation number seen since June last year, in the immediate aftermath of the cancellation of the post-lockdown stamp duty cut. It comes after 2021 saw the highest number of UK property transactions since 2007.

Recent market data has suggested that prices are being kept high by an ongoing shortage of new homes coming on to the market, with Zoopla last week saying that demand was up 49% on the same month last year.

Robert Gardner, Nationwide’s chief economist, said that the outlook for the housing market remained uncertain, but that it was likely that the market will slow this year.

“House price growth has outstripped earnings growth by a wide margin since the pandemic struck and, as a result, housing affordability has become less favourable,” he said.

“Reduced affordability is likely to exert a dampening impact on market activity and house price growth, especially since household finances are also coming under pressure from sharp increases in the cost of living.”

Despite this, Iain McKenzie, CEO of The Guild of Property Professionals, hailed the “incredible” start to the year. He said: “After a blockbuster 2021 for property prices, signs of the predicted slowdown in the housing market in 2022 are nowhere to be seen.

“We’re seeing house price growth pushed ever higher by the limited number of properties on the market.”

However, he said he expected a cooling of prices in the coming months, as cost of living increases impact housing affordability.