The average UK house price increased by £27,000 last year, ending 2021 on a record high of £275,000, new figures show.

The Office for National Statistics (ONS) said the average house price across the whole of the UK, as well as in England and Wales, reached record levels in the month of December.

Across the UK generally, residential property prices increased by 10.8% over the year to December 2021, accelerating from 10.7% in November 2021.

The average price of a home in Wales increased by 13% over the year to December 2021, accelerating from an increase of 12.6% in November 2021. The latest increase pushed the average property price in Wales to a record level of £205,000.

In England, property values increased by 10.7% over the year to December 2021, up from a rise of 10.5% in the year to November 2021, with the average house price at a record high of £293,000 in December.

The average house price in Scotland increased by 11.2% over the year to December 2021 to reach £180,000. This was lower than a 12.1% increase in the year to November 2021.

In Northern Ireland, property values increased by 10.7% annually to reach £159,000, but the data for Northern Ireland for the fourth quarter of 2021 is still not available.

Industry reaction:

Jason Tebb, CEO of OnTheMarket, commented: “Although this index is somewhat historic, it confirms what the market was witnessing as the year drew to an end – high levels of demand from buyers, combined with limited stock, further pushing up prices.

Of more interest now is how the housing market is faring as we head towards what is traditionally the busy spring period. While instruction numbers are increasing, the number of available properties is still some way short of meeting pent-up buyer demand.

Sellers coming to market now may well find considerable competition for their home from the many motivated buyers keen to move and take advantage of competitive mortgage deals.”

Nick Leeming, Chairman at Jackson-Stops, said: “The results close out a remarkable year for the property market. Usually we expect to see a dip in prices over the Christmas period but they actually rose to new heights, with December’s average house price up again, both compared against November’s data and the previous year which have risen by nearly 11% in only 12 months. This is a fitting end to a year where prices and demand exceeded expectations, with figures still very much reflecting both a lack of supply in the market and the firm intent of today’s buyer.

“With house prices continuing to rise even without fiscal incentives, low supply and strong demand will continue to steer the market in the early stages of 2022. This is  something that we’re seeing across our branches in terms of how its impacting the behaviour of buyers. It is now essential that aspiring buyers have positioned themselves as ready to transact, with their home ready to sell and finance arranged up front.

“Britain’s renewed love of the countryside in the wake of the pandemic drove a significant amount of activity throughout 2021, but in 2022 we’re seeing this same sentiment reflected in a reluctance for some potential vendors to sell – especially in areas that combine good connectivity with access to open spaces. Market conditions continue to favour sellers, but concerns around higher costs of living and rising interest rates could serve to modify price rises over coming months. Listing now puts vendors in the best possible position to capitalise on a still buoyant market, while buyers should act now to benefit from cheap borrowing while interest rates remain low. These factors should motivate both buyers and sellers in coming months, leading to a more balanced dynamic between supply and demand.”

Chris Hodgkinson, managing director of HBB Solutions, said: “We’re yet to see a let up in the torrential downpour of homebuyer demand that has washed over the property market pretty much since the start of the pandemic. As a result, those looking to sell are achieving a very good price which is driving property values ever higher.

“Current market conditions are so strong that even when transactions are falling through, sellers are securing another buyer immediately and for a higher price than they had agreed during their original sale.

“This won’t last forever though and those entering the market this year should tread with a little more caution. Although demand levels are likely to remain robust, buyers will start to feel the pinch caused by an increase in both the cost of living and borrowing. So sellers who persist with unrealistic asking price expectations will struggle to see them met.”

Michael Bruce, CEO and founder of Boomin, commented: “It’s only fitting that house prices should continue to climb in December, as the curtain falls on what has been quite an extraordinary year for the property market.

“However, while the scales of supply and demand remain firmly tipped in favour of the nation’s home sellers, there’s a good chance that the high rate of house price growth seen during the pandemic will now subside, replaced by more incremental gains during the year ahead.”

James Forrester, managing director of Barrows and Forrester, commented: “It’s hard to remember a time when the property market has been firing on all cylinders for such a sustained period and we continue to see numerous areas driving top line market performance forward at quite some rate.

“Of course, this rate of growth isn’t sustainable for ever and we expect to see some natural correction in the coming months. This certainly won’t come in the form of a house price collapse, but those thinking of selling would be wise to do so sooner, rather than later.

“There is currently an incredible shortage of stock available on the market and we’re seeing numerous buyers fight it out over a single property. With such an imbalance, those that do bring their home to market are sure to achieve very close to asking price and, in some cases, quite a bit more.”

Marc von Grundherr, director of Benham and Reeves, commented: “The market outlook for the year ahead remains positive despite dark cloud gathering in the form of increasing interest rates and an inflated cost of living. While these factors will certainly influence the market to some extent, they are unlikely to dampen our appetite for homeownership and with stock levels remaining insufficient, market values are unlikely to decline anytime soon.

“That said, it is likely that the wider UK market will now shift down a gear or two where the rate of house price growth is concerned, with early signs suggesting that London is once again poised to take house price pole position.

“Buyer demand for central London flats has picked up considerably and this is a very promising sign given it’s really the core segment of the central London market. This growing demand will continue to be bolstered by a return to the workplace and most notably, the return of foreign buyers and renters, with these factors continuing to pull London out of the doldrums where it’s sat for much of the pandemic.”