Nationwide records ‘surprising’ bounce back in UK house price growth
Average UK house price growth rebounded back to two-year highs in November, according to Nationwide, and even the lender was surprised.
The latest Nationwide House Price Index recorded a 3.7% annual rise in typical property values.
The figure was up from 2.4% in October and the fastest rate since November 2022.
Monthly growth was up 1.2% and average prices are now just 1% below their peak at £268,144, Nationwide said.
Robert Gardner, chief economist for Nationwide, said:
“The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.”
He said the pickup in growth is unlikely to have been driven by the drop in Stamp Duty thresholds next April as the majority of mortgage applications would have commenced before the Budget confirmation of the changes in October.
Gardner added:
“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the higher interest rate environment.
“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year.
“Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s.”
He warned that gauging the underlying strength of the market will be more difficult in the coming months as the upcoming Stamp Duty changes will provide an incentive for buyers to bring forward house purchases to avoid paying additional tax.
Gardner said:
“This is likely to lead to a jump in transactions in the first three months of 2025, especially in March, and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.
“This has the potential to shift the demand/supply balance in the near term and impact price movements.
“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
Commenting on the data, Iain McKenzie, chief executive of The Guild of Property Professionals, said:
“The property market looks set for an interesting few months, with changes to Stamp Duty threatening to create a rush of activity in early 2025.
“Few were expecting such a strong rebound in annual house price increases, especially due to the significant challenges in the economy for many consumers.
“However, we’ve seen before that changes to property taxation tend to create a surge in transactions before implementation, followed by a quieter period afterwards.
“We saw this pattern clearly during the pandemic stamp duty holiday.
“This artificial deadline could create a frenzy of activity at the start of the year, as buyers race to complete before the changes take effect.
“However, this short-term boost is likely to be followed by a natural cooling-off period as the market rebalances.
“The underlying fundamentals of the market remain strong though, with the prospect of lower interest rates and wage growth both set to improve affordability as we move through 2025.”
Nathan Emerson, chief executive of Propertymark, added:
“It’s likely that as both the confidence and affordability of buyers increase due to the easing of inflation, this has spurred on activity in the market and as a result, we are starting to see health restored in the form of steady house price growth.
“What we are likely to witness now is a further spike in activity especially for buyers in England and Northern Ireland as some rush to complete before the upcoming Stamp Duty rises due to commence from April 2025.”
Kindly shared by Estate Agent Today
