Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month, according to the latest Nationwide house price index.
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.
Additionally, all regions saw a pickup in house price growth rates in Q4, within a fairly narrow range of 5% to 9%. The East Midlands was the strongest region in 2020, with prices up 8.6% over the year.
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 pandemic itself also boosted activity, as life in lockdown and changes to working patterns led many to re-evaluate their housing needs.
“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.
“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.”
Lucy Pendleton, property expert at James Pendleton estate agents, commented: “The year has ended with a bang and not a whimper. There are still plenty of buyers out there competing with each other for bigger and better properties, and detached homes continue to outperform.
“This is continuing to spur high house price growth even though these buyers will know they are more likely than not to miss out on the stamp duty tax break ending at the end of March, as conveyancing is still taking a relatively long time.
“It’s important not to underestimate this market going into 2021, despite some predicting price falls of nearly 14 per cent next year. When the vast majority of these agreed sales were negotiated, the uncertainty of a no-deal Brexit was still firmly on the table. So despite being faced down by major reasons to wait and see or be financially conservative, buyers were still content to bid up prices and deliver a rise in annual growth that hit a six-year high this month.
“This underlines how buyers are more motivated by the need to move than a relatively small tax incentive. Any hint that the market is less hung up on a tax break than previously thought, and driven more by a hunger for more space means prices will be more insulated next year, and the rebound in the economic outlook could also still surprise us.”
Nicky Stevenson, managing director at Fine & Country, added: “Opinion is split on whether house prices will continue to rise next year but the outlook has definitely improved and buyers shrugged off any headwinds to close out the year in robust fashion.
“The Brexit deal will give the housing market a much softer landing than feared, turning a potential stall into more of a glide. With this key obstacle out of the way, it’s not likely, in a market where demand and supply are still so mismatched, that the UK will get anywhere close to zero growth, even in real terms as inflation remains very low.
“The progress in Brussels has removed one of the biggest threats that the housing market faced in the first quarter of 2021 but it hasn’t been the only positive. In mid-December the furlough scheme was extended by a month to the end of April, meaning it will no longer coincide with the end of the stamp duty holiday and changes to the Help To Buy scheme.
“At the start of December, Britons were eyeing two cliff edges that might impact the financial choices they made. By the end of the month the first had disappeared entirely and the second had been significantly watered down. That’s going to provide a big dose of confidence to buyers who were already bullish, while the seemingly never-ending threats of further lockdowns will keep homeowners fixated on the lack of space they have at home, putting a floor under prices.”
Source: Financial Reporter