With house price growth at 10.4%, 2021 was the strongest calendar year for price growth since before the Global Financial Crisis (GFC) in 2008. House prices rose by 1.0% in December alone, according to Nationwide, and annual house price growth has now exceeded 10% in seven of the last eight months.

The ‘race for space’ pushed up prices across the UK in 2021. Demand was driven by the experiences of lockdown and fuelled by the stamp duty holiday. Wales saw the highest house price growth at 15.8%, and was the strongest performing part of the UK for the first time since the Nationwide data began in 1973. The South West was the best performer of the English regions at 11.4%, while London saw the lowest growth at 4.2%.

This strength looks set to last, at least for the next few months. Demand continued to outstrip supply in November, according to the RICS survey. And that will underpin continued house price growth.

The number of homes sold in 2021 will also set a post-GFC record. Completed transactions for the first 11 months of 2021 totalled 1.36 million, 25% higher than the 2017-19 average. The scene is set for a busy start to 2022, as sales agreed remained at elevated levels in November, according to TwentyCi. 

Heightened activity may not last many more months, however. Mortgage approvals have returned to pre-pandemic levels, according to the Bank of England, and the supply of homes coming onto the market for sale has been falling since April, according to RICS.

Rising interest rates present a longer term restraint on house price growth. The Bank of England’s base rate rise to 0.25% has been reflected by mortgage lenders, but will have little effect on the market. A further rise to 0.5% is expected in the middle of the year. This is particularly bad news for first time buyers, who also face rapidly rising rents and energy bills, limiting their ability to save for a deposit.

The top five local authorities for annual house price growth in September were all in Wales, with Ceredigion at 21.6%, the only local authority to exceed 20% house price growth. Blaenau Gwent and Powys followed at 19.4% and 17.1% respectively. Nine local authorities experienced annual house price falls. Most were in London, including Islington at -3.9% and Westminster at -2.5%.

Rents also rose by a significant 7.4% across the UK in the year to November 2021, according to Zoopla. The South West region saw the strongest rental growth, at 9.6%. But strong rental growth is scattered around the country. All local authorities saw positive rental growth in the year to November 2021, with the highest rental growth in Richmondshire at 22.9%, Folkestone and Hythe at 15.8% and Torfaen at 15.4%. 

London has seen the strongest rental growth more recently, with 6.2% growth over the three months to November. The central London boroughs of Westminster, Kensington & Chelsea and Islington have seen the greatest rent rises over the same three month period, at 9.5%, 7.7% and 7.4% respectively.