House prices - will a big squeeze follow the record rise

The Halifax released its house price index for December this morning

What they said

House prices reach a record high of £276,091
Increasing by 9.8% in December 2021
House prices increased by £24,500 in 2021 House price growth expected to slow in 2022

Twindig take

In December, the Halifax house price index increased for the sixth consecutive month in a row. To say that the housing market was strong in 2021 is an understatement, in a year characterised by uncertainty and lockdowns, house prices reached new record highs on eight occasions.

The perfect storm of lockdowns, stamp duty holidays, working from home, and a shortage of homes for sale saw more money than usual channelled into our homes, and house prices rose as a result.

Will a big squeeze follow the record rise?

Looking ahead, 2022 might not be so rosy. At 9.8% annual house price inflation was at its highest level since July 2007 and we all know what happened next. Whilst a credit crunch is not on the cards, household budgets are likely to be squeezed, and mortgage rates are more likely to rise than fall this year. The Resolution Foundation has predicted that 2022 will be the year of the squeeze and this squeeze may also impact house prices However, there remains a shortage of homes for sale and housing transactions and mortgage approvals bounced back to more normal levels quicker than we expected following the end of the stamp duty holiday.

For now, we are sticking to our central case that house prices will rise by 5% in 2022.