British house prices rose 6.5% in November – the highest rate since January 2015

Average house price is now £229,721, as market accelerates despite Covid-19

A man walks past houses in Maida Vale in London, England. Britain's housing market has bounced back strongly from the first lockdown earlier this year when the market ground to a halt. Getty Images

British house prices rose 6.5 per cent in November year-on-year, the fastest rate since January 2015, as the housing market boom accelerated against the backdrop of a wider economy struggling with the effects of Covid-19.

The average house price is now £229,721 ($306,402), up 0.9 per cent from £227,826 in October, according to the latest Nationwide House Price Index.

Despite the increase, Robert Gardner, Nationwide's chief economist, said the outlook remained highly uncertain due to the pandemic and will depend on how well Covid is contained, as well as the policy measures implemented to limit the economic fallout.

“Annual house price growth accelerated from 5.8 per cent in October to 6.5 per cent in November – the highest outturn since January 2015. Data suggests that the economic recovery had lost momentum even before the latest lockdown came into effect," he said.

“Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.”

Britain's housing market has bounced back strongly from the first lockdown earlier this year when the market ground to a halt, propelled by demand for bigger properties from those cooped up in their homes for long periods and finance minister Rishi Sunak's emergency stamp duty holiday that will expire at the end of March.

The strength in demand contrasts with weakness in the wider economy as a whole, which is struggling with heightened restrictions that aim to curb the spread of Covid-19.

Britain’s economy is expected to contract 11.3 per cent in 2020 – the biggest contraction in more than 300 years – according to official figures, with the cost of the pandemic set to hit £280 billion this year alone.

The government will borrow £394bn in the 2020-21 fiscal year to help prop up the economy, the equivalent of 19 per cent of gross domestic product (GDP).

Labour market conditions have also weakened, with the unemployment rate hitting 4.8 per cent in the three months to September, and expectations it will hit 7.5 per cent by the middle of next year.

“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 about 97,500,” said Mr Gardner.

He expects housing market activity to slow in the coming quarters, “perhaps sharply”, if the unemployment rate weakens further and “especially once the stamp duty holiday expires at the end of March”.

However, analysts said the government might extend the tax break or roll out a new mortgage guarantee scheme to prevent house prices from sliding backwards.

"A relatively narrow cohort of well-off households, who already own their homes with little debt, seem to be driving the market with the savings that they have realised this year from working from home," said Samuel Tombs, an economist with Pantheon Macroeconomics.

Nationwide’s figures contrast with Halifax data published on Monday which indicated that consumer confidence in the housing market cooled last month.

Fourteen per cent of those surveyed by Halifax said that they believed their home became more valuable in November, compared with 17 per cent in September and October.