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House prices defy experts and keep climbing Nationwide figures show

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Wed 01 Dec 2021

House prices defy experts and keep climbing Nationwide figures show

House prices rose again in November, confounding experts’ predictions that a red-hot run that began last summer would cool off over the winter after the end of the stamp duty holiday.

In its latest house price index, Nationwide said that prices rose 0.9 per cent last month and annual house price growth crept back into double figures, up 10 per cent compared with this time a year ago.

That was a pick-up from October, the first month without the added tailwind of the stamp duty holiday, when month-on-month growth was 0.7 per cent and annual grow was 9.9 per cent.

The average price of the typical home in Britain is now £252,687. Prices have risen by more than £33,000, or 15 per cent, since the coronavirus first struck in last year.

Despite having to effectively close down for much of the spring, the property market roared back in the summer of 2020 after the ending of the first lockdown.

 

Having been confined to their homes for weeks on end and with fewer workers heading into the office five days a week, people sought to move out of cities and into bigger houses with more garden space. Savings made during lockdown also helped would-be buyers to top up their deposits, and the stamp duty holiday, which at one point was saving buyers as much as £15,000, added further fuel to the market.

There have already been more housing transactions this year than in 2020, and activity levels are tracking close to those recorded in 2007 before the global financial crisis rocked the property market.

“Underlying activity appears to be holding up well,” Robert Gardner, Nationwide’s chief economist, said. “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.”

However, he cautioned that the outlook “remains uncertain”. The impact of the Omicron variant is, as yet, unknown, and consumer confidence levels haven fallen sharply since the summer amid the rise in the cost of living. “Even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market,” he added.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that he expected mortgage rates to “rise enough over the coming months to ensure that house prices stagnate in the first half of 2022”.

Nationwide pointed out that house price growth had been outpacing income growth by a “significant margin”, which has made homes less affordable for those trying to get on the ladder. In a recent affordability report, it said that a 20 per cent deposit now equates to 110 per cent of pre-tax income — a record high.

Historically, house prices have been about 3.8 times higher than average household income but that has now risen to 5.5 times, surpassing the previous high of 5.4 times set in 2007.