UK house prices surge as annual growth jumps to 10%
UK’s house prices continued to surge in November, with the annual growth rate hitting double digits, although the outlook for the market remains uncertain as it unclear what effect the new COVID variant will have.
Nationwide’s latest house price index revealed that annual house price growth was strong in November at 10%, slightly higher than the 9.9% recorded in October. Prices rose 0.9% month-on-month, after taking account of seasonal effects.
The average house price, not seasonally adjusted, went from £250,311 ($332,89) in October to £252,687 in November.
House prices are now almost 15% above the level prevailing in March last year when the pandemic struck.
Activity has been “extremely buoyant” in 2021, said Robert Gardner, Nationwide's chief economist. The number of housing transactions so far this year has already exceeded the number recorded in 2020 and is tracking close to the number seen at the same stage in 2007, before the global financial crisis hit.
The number of mortgages approved for house purchases in October was still running above the 2019 monthly average.
Read more: UK set for housing boom with property market busiest ever since 2007
However, 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.
“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,” said Gardner.
“Early indications suggest that labour market conditions remain robust, despite the furlough scheme finishing at the end of September. If this is maintained, housing market conditions may remain fairly buoyant in the coming months, especially since the market has momentum and there is scope for ongoing shifts in housing preferences, as a result of the pandemic, to continue to support activity,” he added.
But the outlook remains uncertain. For one, it is unclear what impact the new Omicron variant will have on the economy. While consumer confidence stabilised in November, sentiment remains well below the levels seen during the summer, partly as a result of a sharp increase in the cost of living. And inflation is set to rise further.
Gardner said that even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market. He said house price growth has been outpacing income growth by a significant margin and housing affordability is already less favourable than was the case pre-pandemic.
“As we head into the final stretch of 2021 it’s quite remarkable to not only see a sustained level of high transactional volume but yet another dose of double-digit house price growth," said estate agent Bective’s head of sales, Craig Tonkin.
He said this is partly being driven by the returning health of the London market, an an uplift in domestic activity and returning foreign demand across the top tier of the market.
