UK house prices soar by highest average cash rise in almost two decades

House prices increased by more than £24,500 on average in 2021, according to an index, marking the largest annual cash rise in almost 20 years.

The typical UK property value hit a new record high of £276,091 in December 2021, Halifax said.

It was the largest annual cash rise since 2003.

Property prices hit new record highs eight times last year, according to its monthly index, despite the impacts of the coronavirus pandemic.

House prices increased by more than £24,500 on average in 2021, Halifax said. Picture: Andrew Matthews/PA Wire

But house price growth is expected to slow considerably this year, the report added.

The average UK house price increased by 9.8 per cent annually and by 1.1 per cent month on month in December.

The rise recorded in Scotland was 9.7 per cent year on year, with the average house price growing to £192,988 last month.

Russell Galley, managing director, Halifax, said: “UK house prices climbed again in December for the sixth month in a row, rising by 1.1 per cent.

“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.

“The housing market defied expectations in 2021, with quarterly growth reaching 3.5 per cent 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 lockdown for much of the first six months of the year.

“The lack of spending opportunities afforded to people while restrictions were in place helped boost household cash reserves.

“This factor, alongside the stamp duty holiday and the race for space as a result of home-working, will have encouraged buyers to bring forward home purchases that may have been planned for this year.

“The extension of the Government’s job and income support schemes also supported the labour market and may have given some households the confidence to proceed with purchases.

“A lack of available homes for sale, and historically low mortgage rates, have also helped drive annual house price inflation to 9.8 per cent, its highest level since July 2007.

“Looking ahead, the prospect that interest rates may rise further this year to tackle rising inflation, and increasing pressures on household budgets, suggests house price growth will slow considerably.

“Our expectation is that house prices will maintain their current strong levels, but that growth relative to the last two years will be at a slower pace.

“However, there are many variables which could push house prices either way, depending on how the pandemic continues to impact the economic environment.”

Looking at annual house price growth across the UK, Wales remained the strongest performer, recording annual house price inflation of 14.5 per cent last month.

London remained the weakest performing area for annual house price inflation, with a 2.1 per cent increase.

Martin Beck, chief economic adviser to the EY Item Club said: “A fall in mortgage approvals in late 2021 to pre-pandemic levels suggests that the end of the stamp duty holiday in October has prompted a return to more normal levels of housing market activity and demand.

“The Bank of England’s decision in December to raise bank rate will feed through into higher mortgage rates and is likely to be followed by further interest rate increases later this year.

“Households’ spending power is being squeezed by rising inflation and faces further pressure in the spring from tax rises.”

Jan Crosby, head of infrastructure, building and construction at KPMG UK, said: “The price rises seen last year will continue to impede first-time buyers in particular.”