House price growth returns to double digits

House price growth returns to double digits
  Photographer: Chris J. Ratcliffe/Bloomberg

House price growth marginally increased in November to 10 per cent, returning back to double digits after slipping to 9.9 per cent in October.

Prices were also up 0.9 per cent month-on-month, according to Nationwide’s latest house price index.

The growth, though slight, follows one of the worst Octobers for house sales in nine years.

“House prices remain stubbornly high despite transaction levels beginning to relax following the record surge in activity earlier in the year,” said Nicky Stevenson, managing director at national estate agent Fine & Country.

“A poor supply of housing stock has been insufficient to meet the scramble for bigger homes with more outdoor space.”

But Stevenson expects the housing market to experience an “easing off” from double digit growth in the months ahead.

Guy Gittins, chief executive of London-based estate agent Chestertons, said his firm saw “a slight drop” in finalised sales in November, following on from October’s lows.

Gittins said this was “an expected side effect”, due to the fact many prospective borrowers prioritised holidays in August and September over saving for a deposit after an easing of travel restrictions earlier this year, which he said “automatically led to fewer viewings”.

Experts also put October’s 48.4 per cent decline in property sales down to the full re-introduction of stamp duty land tax, which requires payment outright and hence impacts buyers’ affordability.

But Anna Clare Harper, chief executive of property consultancy SPI Capital, said the shortage of quality housing and the wide availability of cheap finance were the two biggest factors driving a national demand for homes which exceeds supply, hence preventing house prices from falling significantly.

“The biggest problem the housing market faces going forward is the shortage of available stock, which means that prices are likely to remain strong and continue to grow, although that growth may slow,” she explained.

Growth will persist as long as interest rates are low, since the cost of holding on to a property is cheap, and competition amongst lenders means low cost, fixed rate mortgages are widely available, according to Clare Harper.

'A cooling influence'

Some experts are wary of an “uncertain” outlook for the housing market, whilst others expect “normal’ trading” in early 2022.

Robert Gardner, Nationwide's chief economist, said: “The outlook remains uncertain, where a number of factors suggest the pace of activity may slow. It is unclear what impact the new ‘Omicron’ variant will have on the wider economy. 

“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.”

Even if economic conditions continue to improve, Gardner believes 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.”