British house prices accelerated 10 per cent in November compared with a year earlier and are now almost 15 per cent higher than at the start of the pandemic despite the end of the stamp duty holiday.
The average price of a home rose 0.9 per cent to £252,687 ($336,400) in November from £250,311 the previous month, beating all expectations, according to UK building society Nationwide.
Robert Gardner, Nationwide's chief economist, said activity had been "extremely buoyant" in 2021 but that there was uncertainty ahead.
“Annual house price growth remained strong in November at 10 per cent, marginally higher than the 9.9 per cent recorded in October,” Mr Gardner said. "Underlying activity appears to be holding up well.”
Demand for housing has been strong across the UK since restrictions were first eased at the end of the first coronavirus lockdown last year, boosted by demand for bigger properties as more people work from home.
The British market was also bolstered by a tax incentive offered by Chancellor of the Exchequer Rishi Sunak, which fully expired at the end of September, when a jobs support programme also lapsed.
While Mr Gardner noted "some signs of cooling in housing market activity in recent months", with the number of housing transactions down almost 30 per cent year on year in October, he said this was almost inevitable, given the expiry of the stamp duty holiday at the end of September.
Since the end of the furlough programme, also on September 30, there has been no sign of a big jump in unemployment, with a shortage of homes for sale also helping to support house prices.
Nationwide
"If this is maintained, housing market conditions may remain fairly buoyant in the coming months, especially since the market has momentum and there is scope for ongoing shifts in housing preferences, as a result of the pandemic, to continue to support activity," Mr Gardner said.
Guy Gittins, chief executive of estate agency Chestertons, said with the market enjoying "a great deal of appetite from house-hunters" after the summer holidays, particularly in October, the number of agreed sales is expected to stay high for the rest of the year and into the first quarter of next year.
Mr Gardner, however, said the outlook is uncertain, with the effects of a possible Bank of England interest rate rise and the Omicron variant of coronavirus on the economy unclear.
"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 per cent in the coming quarters," he said.
"Even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market. Indeed, house-price growth has been outpacing income growth by a significant margin and, as a result, housing affordability is already less favourable than was the case before the pandemic struck."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, expects mortgage rates to head upwards in the coming months, leading to a stagnation in prices in the first half of 2022.
"[Rates will] then rise only slowly in the second half, thereby slowing the year-over-year growth rate of prices to about 2 per cent by the end of next year," Mr Tombs said.
