Nationwide House Price Index: UK House Prices Return to Double Digit Growth

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.

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, commented Robert Gardner, Nationwide’s Chief Economist.

Gardner continues, indeed, 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.

Moreover, underlying activity appears to be holding up well.

The number of mortgages approved for house purchases in October was still running above the 2019 monthly average.

Early indications also 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.

But the outlook remains uncertain, where a number of factors suggest the pace of activity may slow.

It is unclear what impact the new ‘Omicron’ variant will have on the wider 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.

Moreover, inflation is set to rise further, probably towards 5% in the coming quarters.

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.

Tom Bill, head of UK residential research at Knight Frank, said:

“The UK housing market has powered its way through the end of both the stamp duty holiday and the furlough scheme.

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 downwards 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 while any impact on supply and demand will depend on how it compares to previous variants.”

Bective’s Head of Sales, Craig Tonkin, commented:

“While the chances of a white Christmas are slim, property market momentum continues to snowball.

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.

There’s no doubt this is partly being driven by the returning health of the London market.

While there are signs that the rest of the market is cooling, the region has gone from strength to strength in recent months.

This is not only due to an uplift in domestic activity but also from returning foreign demand across the top tier of the market.

We’ve also seen a very strong uplift in rental demand and the combination of all of these factors is helping to push the dial.”

Founder and CEO of GetAgent.co.uk, Colby Short, commented:

“House prices continue to climb despite fears around an interest rates increase and it seems as though the only person that will be working harder than the nation’s estate agents this December is Father Christmas himself.

There’s been absolutely no let-up in buyer demand this year and this coupled with ongoing supply limitations has been the driving factor behind such a jolly level of house price appreciation.”

Commenting on UK house prices returning to double-digit growth, Tom Brown, Managing Director of Real Estate at Ingenious, said:

“Positive economic data, increased job security and employment with wages on the up have underpinned residential property markets which continue to perform well.

However the market is complicated when we look behind the headline numbers.

While many segments continue to grow, city centre flats, for example, don’t always paint the same overall picture of demand which has reduced as people search further afield for more outside space, homes with gardens, practical workspaces and quality infrastructure.

When analysing residential markets, it is key that we take a close look at the subsectors and the regions in which they are located.

It can be misleading to look too broadly and at Ingenious, we remain committed to providing flexible, cost effective financing solutions for our clients by sourcing residential opportunities from across the UK based solely on individual merit.”

Walid Koudmani, market analyst at financial brokerage XTB comments:

“Today’s Nationwide HPI showed a slight increase in house prices with Annual house price growth increasing in November to 10.0% after a 0.9% MoM increase.

The index continues to highlight rising inflation and its impact on different sectors of the economy and while the focus in recent days has been on the new variant, today’s HPI could add pressure to the Bank of England to potentially take action in the near future by adjusting its policy”

Comment from Ross Counsell, chartered surveyor and director at GoodMove, on today’s Nationwide House Price Index:

“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.

So, what does this mean for the housing market?

Right now, with the ‘Omicron’ variant hitting the headlines, there is increased uncertainty surrounding the housing market and the wider economy.

What’s more, with inflation set to increase to 5% over the coming months, leading to an increase in the cost of living, first-time buyers, in particular, may be more reluctant to commit to such a large purchase with increased uncertainty on financial security.

For those looking to purchase property, my advice would be to keep a careful eye on the economy, the housing market, and coronavirus developments.

Once these factors begin to stablise, this is when I would suggest is the best time to purchase a property.