There was an unexpected increase in house prices in January, with annual growth accelerating to 3.2 per cent, according to Nationwide.
Its monthly house price index showed a monthly change of 0.6 per cent, and an annual change of 3.2 per cent. This compares to the more modest 2.6 per cent annual growth seen in December.
According to Nationwide the average house price in the UK is £211,765.
Nationwide chief economist Robert Gardner described this increase as “surprising”, given the squeeze on household incomes and low consumer confidence.
But he added: “The lack of supply is likely to be the key factor providing support for house prices. The flow of properties coming onto the estate agents’ books has been more of a trickle than a torrent for some time now.”
He says: “Mortgage approvals declined to their weakest level for three years in December, at just 61,000. Activity around the end of the year can often be volatile but the weak reading comes off the back of subdued activity in October and November.”
Gardener adds: “How the housing market performs in the year ahead will be determined in large part by developments in the wider economy. Brexit developments will remain important, though these remain hard to forsee.”
Nationwide said it expected low unemployment, low mortgage rates and a lack of supply to continue to support property prices over the year ahead, with “low levels” of activity in the housing market.
Octane Capital chief executive Jonathan Samuels says: “The rebound in annual price growth is less about demand strength than supply weakness.
“Against a backdrop of squeezed incomes and Brexit-related uncertainty, demand is understandably subdued, but prices are being supported by the sheer lack of homes for sale and the low cost of borrowing.
‘With so many economic and political unknowns on the horizon, 2018 looks set to deliver a year of low single digit growth.”
Garrington Property Finders managing director Jonathan Hopper says: “January’s surprise outbreak of economic confidence has proved contagious with even the property market catching a case of positivity.”
Hopper says there was a “flurry of activity in December, with deals being done”.
Demand remained solid in many areas, he says, especially those within commuting distance of London, and in regional hotspots such as Manchester. Hopper adds: “We expect this to drive prices up further in 2018.”
Habito founder Daniel Hegarty says: “Nationally property prices are stubbornly high and continuing to grow, which is good news for homeowners, but yet again, increases the challenge for first-time buyers.
“The fact that the number of homeowners aged 25-34 has fallen dramatically in the last decade, demonstrates how thousands seem to be locked out of owning their own home.”