"With interest rates increasing and the opportunity of a stamp duty saving now long gone, we expect to see a more measured market performance over the coming year."
The average UK house price was £275,000 in December, £27,000 higher than at the end of 2020.
Average house prices increased over the year by 10.7% in England, 13.0% in Wales, 11.2% in Scotland, and 10.7% in Northern Ireland.
The South West was the region with the highest annual house price growth, with average prices increasing by 13.6% in 2021.
The lowest annual house price growth was in London, where average prices increased by 5.5% over the year.
Head of corporate partnerships at Sirius Property Finance, Kimberley Gates, commented: “We’ve seen many buyers push their budget that little bit further over the last 12 months due greater levels of mortgage affordability and a stamp duty saving. This has helped drive top line house price growth across the UK and we’ve seen the market continue to go from strength to strength as a result.
"With interest rates increasing and the opportunity of a stamp duty saving now long gone, we expect to see a more measured market performance over the coming year.
"While there’s certainly no reason to panic, the monthly cost of a mortgage will start to climb for those that aren’t locked into a fixed rate and this will impact the price buyers are willing to pay to climb the property ladder.”
Jeremy Leaf, north London estate agent and former RICS chairman, said: "On the face of it, these figures show the housing market continuing its inexorable rise but maybe that isn’t the case. Looking behind the numbers we see prices, though a little historic, are virtually unchanged from the previous month. Buyers are coming to terms with reduced affordability which is compromising confidence to take on yet more debt as inflation hits record highs and interest rates are on the up too.
"At the sharp end, we are still finding lack of stock is holding back transactions but increasing energy costs in particular are starting to encourage potential downsizers to think more seriously about the long-term suitability of their present homes, which should help to balance out supply and demand."
Tomer Aboody, director of MT Finance, added: "As property prices continued to rise in December, there is a danger that affordability is stretching beyond the means of many would-be buyers. With inflation rising again to 5.5%, and expectations that it could climb considerably further, the possibility of a further interest rate rise in March looks even more likely.
"The housing market is likely to continue to be busy into the spring as buyers fight for every house to make the most of cheap rates before they disappear. That said, we don’t expect a further increase to result in any major hike in mortgage pricing overnight.
"Areas outside of London continue to see the most significant levels of growth, with Wales witnessing the strongest house price growth while London saw the lowest annual growth. However, with the starting price point lower outside of the capital, any change will be more significant. With more people starting to return to work in the office, it will be interesting to see whether this will impact those numbers and whether the allure of London will return."
