A Return to Double Digits for UK Property Price Growth

Annual house price growth for November is reported to have risen to 10%, up from 9.9% recorded in October, according to the Nationwide index.

Continuing to rise, the UK house price increase hit double digits following the end of furlough and the stamp duty holiday, indicating that demand remains strong. According to figures from Nationwide, the average UK property price rose by 0.9%, which followed an increase of 0.7% in the previous month. This takes the average UK house price to £252,687, an increase of 10% from the same period last year.

Property prices have increased to nearly 15% higher than levels seen back in March 2020, when the full effect of the pandemic first hit the UK. The reason for this continual rise can be put down to supply and demand, with a lack of homes available to buy. According to data from HMRC, October 2021 saw the quietest activity for almost a decade. Home sales were 28% lower this October when compared to October 2020, following a record high in activity early on in 2021.

In the same period, figures for mortgage application approval fell to the lowest levels seen for the last sixteen months.

“There have been some signs of cooling in housing market activity in recent months,” Nationwide’s chief economist, Robert Gardner, commented.

He added that this was “almost inevitable” after the stamp duty tax relief in the UK finished at the end of September, as buyers made every effort to bring forward their purchases to take advantage of the tax break.

“Activity has been extremely buoyant in 2021. The number of housing transactions so far this year has already exceeded the number recorded in 2020 with two months still to go and is actually tracking close to the number seen at the same stage in 2007, before the global financial crisis struck,” Gardner said.

He also added that he felt things looked a bit uncertain for the future: “It is unclear what impact the new Omicron variant will have on the wider economy.”

Gardeners felt that the expected rise in interest rates and the increased cost of living would further negatively impact the housing market.

The chief UK economist at Pantheon Macroeconomics, Samuel Tombs, said, “Mortgage rates look to be rising. Swap rates, which lenders use to price their loans, have increased, and profit margins on home loans are already very tight by past standards”, he said.

“Admittedly, the link between variations in mortgage rates and changes in house prices isn’t stable.”

Estate agent Knight Frank’s head of residential research, Tom Bill, commented, “Gravity-defying price growth is the result of low interest rates and tight supply, which are both things we expect to reverse next year, putting downward pressure on prices. Interest rates may rise more slowly if the new Omicron COVID-19 variant proves to be more serious than the early anecdotal evidence suggests.”

The new Omicron variant of the COVID-19 virus is sure to have a cooling effect on the property market, with many people holding back on selling their properties due to uncertainty in the future.

“The number of homes for sale coming on to the market is slowing, which is nudging prices steadily upwards,” said the chief executive of Property Finders, Jonathan Hopper.