UK house prices end on a record after best year since 2006

Values rise £24,000 in 2021 and are now 16% higher than before the pandemic struck

A development in Taunton in Somerset. House prices rose 1 per cent on November, capping the biggest full-year rise in prices since 2006. PA

Britain’s property market ended 2021 on a record high with the average house price hitting £254,822, a rise of £24,000 since the start of the year and up 10.4 per cent since December last year.

House prices rose 1 per cent on November, capping the biggest full-year rise in prices since 2006, according to mortgage lender Nationwide.

“The price of a typical UK home is now at a record high of £254,822, up £23,902 over the year - the largest rise we’ve seen in a single year in cash terms. Prices are now 16 per cent higher than before the pandemic struck in early 2020.” said Robert Gardner, Nationwide’s chief economist.

“Demand has remained strong in recent months, despite the end of the stamp duty holiday at the end of September.”

Mortgage approvals for house purchase have continued to run above pre-pandemic levels, although they dropped in October as activity in the housing market eased following a rush earlier in the year caused by the stamp duty tax holiday.

However, in the first 11 months of 2021 the total number of property transactions was almost 30 per cent higher than over the same period of 2019.

“At the same time, the stock of homes on the market has remained extremely low throughout the year, which has contributed to the robust pace of price growth,” said Mr Gardner.

Britain's housing market rebounded strongly after the first coronavirus lockdown in 2020 and has powered ahead since then, helped by a now-lapsed tax break for buyers and by ongoing demand for bigger properties as more people work from home.

Nationwide’s quarterly figures found Wales ended the year as the strongest performer, with house prices there up by 15.8 per cent year on year – the first time in the history of the regional series (which started in 1973) that Wales has ended the year at the top.

House price growth in Northern Ireland was at 12.1 per cent - the strongest end to the year it has had since 2007, while annual house price growth in Scotland was 10.1 per cent, in line with the UK generally.

London was the weakest performer with annual growth remaining at 4.2 per cent – making it the only UK region to record lower annual growth in 2021 than in 2020.

Affordability in the capital is an issue with the typical buyer in London now located in the 90th income percentile rather than the 80th percentile as was the case 10 years ago, signalling an even larger proportion of people priced out of the market or needing to borrow a greater multiple of their income in order to buy a home.

Separate data from Knight Frank, found that average prices in the capital increased 1.3 per cent in the year to December, a reflection of the static market conditions seen this year.

However, it is a slight improvement on the 4.3 per cent decline recorded in December 2020.

Outside of London the picture was very different with average prices rising 3.2 per cent in the year to December, the strongest annual rate of growth since February 2016 reflecting the robust demand for space and greenery during the pandemic.

Tom Bill, head of UK residential research at Knight Frank, said the Omicron Covid-19 variant has placed the prime London property market at a crossroads.

"Interest rates may stay flatter for longer, demand for space could increase and rising supply may stutter if the new variant proves to be more serious than the early anecdotal evidence suggests," he said.

"The holding pattern that activity and prices have been in for the last six months could be prolonged. Equally, there may be a bounce in transactions early next year if the impact of the new variant is less severe than feared, with supply accelerating to catch up with demand, which itself would be boosted by the return of more international buyers."

Looking ahead, Mr Gardner expects the housing market to slow in 2022, after the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax.

However, the outlook remained extremely uncertain, he said.

"The strength of the market surprised in 2021 and could do so again in the year ahead.The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth,"Mr Gardner said.

"Indeed, the Omicron variant could serve to reinforce the shift in preferences in the near term."