The latest Nationwide House Price Index revealed a increase 10% in house prices in the year to November, surpassing the 9.9% increase recorded in October.
Some experts had predicted a slowdown after the end of the Stamp Duty holiday, but these predictions have once again been proved wrong.
“Annual house price growth remained strong in November at 10.0%, marginally higher than the 9.9% recorded in October. Prices rose 0.9% in month-on-month terms, after taking account of seasonal effects. As a result, house prices are now almost 15% above the level prevailing in March last year when the pandemic struck the UK,” said Robert Gardner, Nationwide’s Chief Economist.
“There have been some signs of cooling in housing market activity in recent months. For example, the number of housing transactions were down almost 30% year-on-year in October. But this was almost inevitable, given the expiry of the Stamp Duty holiday at the end of September, which gave buyers a strong incentive to bring forward their purchase to avoid additional tax.”
The drop in transactions suggest prices are being pushed higher by a persistent lack of supply. Some industry participants feel this will persist into next year as home owners wait to put their homes on the market meaning prices a likely to remain elevated.
“According to the latest Nationwide HPI, average house prices have taken a slight jump to 0.9% month on month, or £2,367, which is the highest increase since May 2021. However, this does not mean prospective buyers should be pessimistic. It is likely that with Christmas coming demand has outweighed supply, as sellers look to hold putting their house on the market until after the new year,” said Ross Counsell, chartered surveyor and director at GoodMove.
However, the prospect of higher interest rates is likely to slow house price growth next year as property has surged way past earnings growth, decreasing the affordability of housing.
“Even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market. Indeed, house price growth has been outpacing income growth by a significant margin and, as a result, housing affordability is already less favourable than was the case before the pandemic struck,” said Robert Gardner.