UK house price growth hits five-year high but could slow ‘sharply’

UK house price growth has accelerated at its fastest pace in more than five years, even as lockdown restrictions have hobbled the UK economy.

Data from mortgage lender Nationwide shows average transaction prices in November are up 6.5% year-on-year, and up 0.9% month-on-month to an average of £229,721 ($307,408).

The continued acceleration of price growth comes in spite of a deteriorating economic backdrop amid tighter coronavirus curbs including England’s month-long shutdown. The property market has been allowed to remain open, unlike in the previous UK lockdown.

Robert Gardner, chief economist at Nationwide, said prices were rising at the fastest annual pace since January 2015.

READ MORE: UK mortgage approvals hit highest level since 2007

“Data suggests that the economic recovery had lost momentum even before the latest lockdown came into effect,” he said. “Rising infection rates and tighter social restrictions will have resulted in a further hit to growth in October and November.

“Despite these headwinds, housing market activity has remained robust. October saw property transactions rise to 105,600, the highest level since 2016, while mortgage approvals for house purchase in the same month were at their highest level since 2007 at 97,500.”

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Gardner said stamp duty cuts in England and Northern Ireland as well as changing demand triggered by the pandemic would continue to propel activity.

But he said the outlook was “highly uncertain,” adding: “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.”

Last week property website Zoopla’s figures showed annual growth of 3.5%, a three-year high.

It predicted the busiest December in a decade and a rush in January to complete before stamp duty reverts to normal levels. But it expects growth to then slow to 1% next year.

READ MORE: Zoopla predicts busiest December in a decade before house price growth slows in 2021