Annual house price growth hits six year high
According to the Nationwide House Price Index, annual house price growth rose to a six year high of 7.3% in December 2020.
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November. House prices ended the year 5.3% above the level prevailing in March, when the pandemic struck the UK.
“The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%.
“But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.
“The furlough and Self Employment Income Support schemes provided vital support for the labour market, while a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing. The stamp duty holiday also stimulated housing demand, by bringing forward peoples’ home-moving plans. Lenders also responded by offering payment holidays to borrowers impacted by the pandemic, helping people stay in their homes rather than potentially being forced to sell.
“The pandemic itself also boosted activity, as life in lockdown and changes to working patterns led many to re-evaluate their housing needs. Our research earlier this year indicated increased demand for less densely populated locations and different property types. This helps to explain why detached properties have seen greater price gains in recent quarters, while flats have underperformed.”
Turning to the future, Gardner continued: “The outlook remains highly uncertain. Much will depend on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy.
“Behavioural shifts as a result of Covid-19 may continue to provide support for housing market activity, while the stamp duty holiday will continue to provide a near-term boost by bringing forward home moves.
“However, housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March.”
So 2021 may see a slow down in house price inflation and transaction volumes, but if 2020 taught us anything it’s that you never know what’s around the corner. Now where did I leave that crystal ball….
If you’d like to talk about moving or remortgaging just get in touch – we’re looking forward to hearing from you.