The annual rise in house prices in November was 10%, which put house prices 15% above the prevailing level seen in March last year.
According to Nationwide’s Home Price Index, that marks a return to double-digit growth last seen in September, up slightly from 9.9% growth in October.
Average house prices in the UK rose 0.9% between October and November to £ 252,687.
It’s the second straight month that house prices have topped £ 250,000 and are around £ 33,000 above average house prices in March last year when the pandemic began.
Nationwide chief economist Robert Gardner said there had been some signs of cooling in the property market, pointing out that property transactions in October were down 30% year over year. However, due to the end of the stamp duty holidays, this is “almost inevitable”.
He said, “In fact, activity in 2021 was extremely brisk. The number of apartment transactions this year has already surpassed the number of 2020 two months before the end and is indeed close to the number recorded in the same phase. “In 2007, before the global financial crisis erupted.”
He added that underlying activity is “holding up” and the number of mortgages approved in October is above the 2019 monthly average. Gardner also said labor market conditions remained resilient despite the end of the vacation program.
Gardner said, “If this is maintained, conditions in the housing market could remain quite buoyant in the months ahead, especially as the market is buoyant and there is scope for sustained shifts in housing preferences due to the pandemic to support activity.”
However, he said there were some signs that activity could slow down, such as the overall economic impact of the Omicron variant, lower consumer confidence due to the increased cost of living, rising inflation and rising interest rates.
Activity in the housing market is expected to remain strong but normalize
Mark Harris, CEO of mortgage broker SPF Private Clients, said few had predicted when the pandemic began that house prices would be 15% higher than they were then.
He said stamp duty, low interest rates, lack of inventory and a strong desire to move caused the “perfect storm” and pushed house prices soaring.
Harris added: “Fortunately, the intensity of the housing market at the beginning of the year has eased as it was unsustainable. But while the foam is gone, there is still a lot of activity as this will be the busiest year for the housing market since 2007 in terms of number of transactions. “
He added that the noise about rate hikes would get “louder” at the start of the new year, but right now mortgage prices are a “mixed bag” as loan contracts rose below 80% (LTV) while higher LTV deals fell.
Tomer Aboody, director of real estate lender MT Finance, added that double-digit growth in house prices in November showed the strength of the market over the past year, and although transaction numbers have cooled, they are still high, nearing their 2007 highs.
He added: “The future is somewhat uncertain due to the ever changing global picture thanks to Covid and the possibility of rate hikes that will slow growth. But we are still experiencing a low interest rate environment that makes buyers more optimistic, more self-confident and more willing to buy. “
Jeremy Leaf, real estate agent in North London and former chairman of the RICS shared apartment, added that local activity has returned to levels that were just before the pandemic or something above.
He added, “These numbers confirm that the stamp duty holidays have led many to move forward with buying decisions, but there are many others who are clearly still determined to take advantage of low mortgage rates and less hectic conditions.
“Our recent surge in market valuations encourages us to expect more ‘normal’ trade and a better balance between supply and continued demand in early 2022, with price growth inevitably slowing despite concerns about interest rates and Omicron.”
Anna Clare Harper, executive director of real estate consultancy SPI Capital, said the stamp duty holiday was a “catalyst” but “not the cause” of recent house price growth. She pointed to factors such as the severe shortage of quality housing and the widespread availability of cheap finance, which caused demand to outperform supply and drive up property prices.
She said it was likely that the pace of growth will slow now, especially during the winter months. However, as interest rates continue to stay low, growth will continue as it is cheap to own a property and competition from lenders means low-cost fixed rate mortgages are available.
Harper added, “Perhaps the biggest problem the real estate market will face in the future is the lack of available inventory, which means prices are likely to stay strong and will continue to rise, although that growth could slow down.”