House price growth in the UK again reached double-digit figures last month, according to an index from the building society Nationwide.
It recorded annual growth of 10% in November, up from 9.9% in October. Prices rose by 0.9% month on month, taking the average UK property value to £252,687.
Robert Gardner, Nationwide’s chief economist, said: “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 (in England and Northern Ireland) at the end of September, which gave buyers a strong incentive to bring forward their purchase to avoid additional tax.
“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.”
However, Gardner said the outlook remains uncertain, adding: “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.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, suggested mortgage rates could rise. Swap rates, which lenders use to price their loans, have increased, and profit margins on home loans are already “very tight by past standards”, he said.
“Admittedly, the link between variations in mortgage rates and changes in house prices isn’t stable,” he said.
“Nonetheless, we continue to think that mortgage rates will rise enough over the coming months, to ensure that house prices stagnate in the first half of 2022 and then rise only slowly in the second half, thereby slowing the year-over-year growth rate of prices to about 2.0% by the end of next year.”
Tomer Aboody, director of property lender MT Finance, said government support including the stamp duty holiday and the furlough scheme had helped support the market.
He added: “The future is slightly uncertain with the ever-changing global picture thanks to Covid and the possibility of interest rate rises, which will slow down growth.”
Guy Gittins, the chief executive of the estate agency Chestertons, said: “As the market witnessed a great deal of appetite from house hunters right after the summer holidays, particularly during October, we are expecting the number of agreed sales to remain high for the rest of the year and into quarter one 2022.”