Residential property prices in the UK continued to increase last month, reaching double-digit growth again as demand continued to heavily outweigh supply despite the end of the stamp duty holiday, the latest data shows.
The average price of a home in the UK rose by 0.9% last month, up from 0.7% a month earlier, taking the average price of a property to £252,687, according to Nationwide.
But with transactions falling, there are some signs of cooling housing market conditions, which Robert Gardner, Nationwide’s chief economist, believes was “almost inevitable” after the stamp duty holiday in England and Northern Ireland finished at the end of September.
Gardner said: “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.”
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Industry reaction: to the Nationwide HPI for November:
Nicky Stevenson, managing director at Fine & Country, said: “House prices remain stubbornly high despite transaction levels beginning to relax following the record surge in activity earlier in the year.
“A poor supply of housing stock has been insufficient to meet the scramble for bigger homes with more outdoor space, and it’s too early yet to predict whether the new strain of Covid will dampen price growth in the future.
“While there’s certainly no evidence that we may be about to move into lower gears, we could experience an easing off from double digit growth in the months ahead.
“For the time being, the market remains buoyant and prices continue to skyrocket.”
Tom Bill, head of UK residential research at Knight Frank, commented: “The UK housing market has powered its way through the end of both the stamp duty holiday and the furlough scheme. Gravity-defying price growth is the result of low interest rates and tight supply, which are both things we expect to reverse next year, putting downwards pressure on prices.
“Interest rates may rise more slowly if the new Omicron Covid-19 variant proves to be more serious than the early anecdotal evidence suggests while any impact on supply and demand will depend on how it compares to previous variants.”
Guy Gittins, CEO of Chestertons, said: “November saw a slight drop in finalised sales. This is an expected side effect following house hunters prioritising their first summer holiday since lockdown in August and September, which automatically led to fewer viewings during this time.
“Whilst November’s property sales have temporarily levelled out from the record-setting first half of the year, buyer enquiries for London properties still remain 20% higher than this time last year; when we had the added incentive of the Stamp Duty holiday; and 47% higher than 2019.
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“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 Q1 2022.”
Andrew Simmonds, director at Bristol-based Parker’s Estate Agents, commented: “Demand for property remains very strong, while supply is exceptionally weak, and the result is double-digit house price growth.
“Though we now know rates are almost certainly going up very soon, possibly this month, let’s not forget that the housing market this time around is built on decent foundations, unlike the global financial crisis when it was undermined by poor lending practices.
“Though it won’t scupper the market, a rise in rates will impact sentiment, if only marginally. It’s certainly likely to cool the enthusiasm and excitement of many buyers to pay top dollar for their next home, but that might not be a bad thing. If I am being frank, we could do with something that takes a bit of fizz out of the housing market.”
Founder and CEO of GetAgent.co.uk, Colby Short, remarked: “Property prices continue to climb despite fears around an interest rates increase and it seems as though the only person that will be working harder than the nation’s estate agents this December is Father Christmas himself.
“There’s been absolutely no let-up in buyer demand this year and this coupled with ongoing supply limitations has been the driving factor behind such a jolly level of house price appreciation.”
Iain McKenzie, CEO of The Guild of Property Professionals, said: “Britain’s year on the move continues, with more properties sold already this year than were sold in the whole of 2020.
“Prices are still climbing due to a shortage of stock available to prospective buyers, with many of those working from home still desperately hunting for a larger property and more space.
“There is still some uncertainty in the market, with the new Omicron variant warning people that it’s not business as usual.
“As long as the labour market remains buoyant and mortgage approvals continue at their current levels, it is likely that the demand for property will remain steady as we move into 2022.”
Jonathan Hopper, CEO of Garrington Property Finders, commented: “The exceptional is almost starting to feel normal. The annual pace of price growth has hit double figures no fewer than six times this year. And while the annual figures have eased off since their peak in June, both the quarterly and monthly rates of inflation remain strong.
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“The cumulative effect has been to push the price of the average home up by 15% since the pandemic struck.
“But despite the seeming continuity on price inflation, market dynamics have shifted fundamentally in the two months since the end of the Stamp Duty holiday in England.
“This is no longer a free-flowing, boom market. Instead prices are being driven up by chronically short supply and seller hesitancy.
“After the frantic final weeks of the tax break in September, sales volumes shrank sharply in October.
“The number of homes for sale coming onto the market is slowing, which is nudging property prices steadily upwards. Supply is set to be curtailed even further by the festive season and the new Covid variant, both of which are likely to prompt would-be sellers to hold off on listing their home until the New Year.
“For now the loss of momentum is gradual, and while we are starting to see some sellers rein in their pricing aspirations, in most areas things are calming down rather than going down.
“The days of sellers being able to raise prices almost by the week are gone and the market is entering a more measured and sustainable phase. Average prices are likely to keep rising, but 2021’s long run of double-digit price inflation is slowly starting to burn itself out.”
By MARC DA SILVA
Source: Property Industry Eye