The latest Nationwide house price index shows that annual house price growth in the UK reached a 6-year high this December, of 7.3%. In November of 2020, it was 6.5%. December’s figure is a 5.3% rise from March when the pandemic struck. A number of factors have contributed to this boost; the current stamp duty holiday, the desire among buyers to relocate due to working from home, and pent up demand following the initial lockdown.
Prices rose all over England with the highest growth, at 8.6%, for the East Midlands, whilst the lowest growth was seen in London and its surrounding areas. The average house price across the country is now at £230,920.
In October, the number of approved mortgages for house purchase reached its highest level for a decade. By the end of the same month, the total for the year was just 7% below that for the same period in 2019.
Robert Gardner, Nationwide’s Chief Economist, said: “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.
“Housing market conditions have remained robust in recent months, even as the wider economic recovery lost momentum and the UK economy faced the prospect of further lockdowns and continued uncertainty about the UK’s future international trading relationships.”
Tomer Aboody, director of MT Finance, the bridging finance specialist, added: “Although the housing market came to a complete standstill just a few months ago, quite remarkably it is finishing the year with prices at a six-year high. Pent-up demand from buyers has led to a jump in transactions and prices.
“With the government helping to prop up the market via its furlough schemes, stamp duty relief and encouragement of banks to lend, buyers have had a great ability to borrow with lowest ever mortgage rates. This has helped buyers to push to levels which potentially they couldn’t achieve before and buy that bigger house they wanted.
“With the potential of these artificial factors coming to an end in March, along with Brexit, the horizon doesn’t look as bright which might mean the government making some u-turn on stamp duty or possibly bringing in new reliefs.”
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Gareth Lewis, the Commercial Director at MT Finance, recently warned of hesitation in the industry, due to the new strain of Covid-19 which has recently been discovered in the UK.
The November 2020 RICS UK Residential Survey also showed a steady increase in recent residential activity. At a national level, a net balance of 27% of respondents cited an increase in new buyer inquiries during November.