By Summary of UK House Price Growth Report – November 2024
Key Highlights:
- Annual Growth Rate: Increased to 3.7% in November from 2.4% in October, marking the fastest annual growth rate since November 2022.
- Monthly Growth Rate: House prices rose 1.2% month-on-month, the largest increase since March 2022.
- Average Price: The average UK house price (not seasonally adjusted) stood at £268,144, up from £265,738 in October.
- Current Market Standing: House prices are now only 1% below their all-time peak.
Commentary from Nationwide’s Chief Economist, Robert Gardner:
- Surprising Growth: The strong rebound in house prices was unexpected given affordability challenges, including high house-price-to-income ratios and elevated interest rates.
- Factors Supporting Growth:
- Resilient housing market activity, with mortgage approvals nearing pre-pandemic levels despite higher borrowing costs.
- Robust labour market conditions, featuring low unemployment and solid income growth that outpaces inflation.
- Healthier household balance sheets, with debt levels relative to income at their lowest since the mid-2000s.
Stamp Duty Changes and Market Outlook:
- Minimal Impact from Stamp Duty Changes: The recent growth is unlikely driven by upcoming stamp duty adjustments, as most mortgage applications predate the announcement.
- Short-Term Market Dynamics:
- Anticipated rush to complete transactions before stamp duty threshold changes in March 2025, likely causing a spike in Q1 2025 activity.
- Expected slowdown in transactions and potential price adjustments in subsequent months, reflecting patterns observed in past stamp duty changes.
- Long-Term Prospects:
- Housing market activity is projected to strengthen gradually, supported by modest declines in interest rates and real earnings growth outpacing house price increases.
Broader Economic Context:
- Debt and Affordability: Improved household financial positions are cushioning the impact of high prices and interest rates, fostering market resilience.
- Economic Recovery: Steady economic growth is anticipated to provide a stable backdrop for the housing market.
This analysis underscores the interplay of resilient fundamentals and policy-induced market shifts shaping the UK housing market.
Industry comments:
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “Further increases in average house prices come as a surprise, considering the affordability challenges and reduced demand in some regions.
“Those areas with limited stock, such as the Richmond Borough, are seeing prices hold firm. Homes that are well priced and well presented are still selling relatively quickly; while buyers may pause to assess financial implications, high-demand areas are likely to retain interest.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Inflation creeping back up is not the required backdrop for aggressive rate cuts, and with the Budget expected to fuel inflation further, this may slow down activity in the market as hard-pressed borrowers who are struggling with affordability wait for rates to come down further.
“Swap rates have slipped back in the past few days but most lenders are still repricing upwards. Borrowers looking for a mortgage should speak to a whole-of-market broker to find the best deal available to them.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “In our offices we are seeing prices hardening and stock levels rising, partly because the Budget, though not particularly helpful, was not as bad as many feared either.
“As a result, some pent-up demand was released and buyers are digging a little deeper. That extra choice, as well as broad acceptance that inflation and mortgage rates will not reduce as far and as fast as many expected, has meant caution still prevails. Transaction lengths are extending too, particularly bearing in mind the seasonal distractions so sellers still need to be extra competitive to attract serious attention at this time of year.”
Commenting on the latest Nationwide data showing house prices rose at much higher pace than expected at 1.2%, Daniel Austin, CEO and co-founder at ASK Partners, said: “We continue to see a month-on-month rise in house prices, which is hopefully the sign of an upward trend developing for the remainder of the year going into 2025. The market certainly appears to be showing signs of resilience. The market is feeling buoyant following the Autumn Budget with £5bn promised for new homes and the government’s permanent establishment of the mortgage guarantee scheme, which supports lenders offering 95% loan-to-value mortgages. Increased supply should continue to support the market and level out values; a plus for first time buyers, who conversely will be hit by the new lower stamp duty thresholds.
“In the property investment world, rent values have seen sustained growth, positioning real estate as reasonably valued in comparison to gilts and presenting growth potential. Incentives announced in the budget to support the Build-to-Rent sector, including £3bn in housing guarantee schemes that provide lower-cost loans should entice developers. While private investors will be hit by Higher Rate for Additional Dwellings, SME housebuilders will benefit from the Affordable Homes Programme and funding to unlock stalled developments, all contributing to increased supply. Sustained house price growth, lower interest rates and dampened inflation alongside new initiatives to benefit developers, should continue to stimulate market growth. As a debt provider we will be pleased to see more favourable market conditions unlocking strong assets in good locations for well-capitalised borrowers.”
Tomer Aboody, director of specialist lender MT Finance, says: “Another month of house price growth further indicates the level of confidence in the market which has been evident since the reduction and stability in both mortgage rates and inflation.
“Both sellers and buyers are pushing to transact, as affordability is improving.
“While the Budget is now behind us, its full impact has yet to be felt. However, we are hopeful that this confidence in the market continues, with further rate cuts expected in the new year.”
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