UK house prices rise at fastest rate since 2006

UK house prices rise at their fastest pace in 15 years in 2021, hitting record highs as low interest rates and the race for more space caused by the pandemic have boosted demand and housing supply remains strong. at low level.

Prices rose at an annual rate of 10.4% in December, making calendar year activity the strongest since 2006, according to data from the National Building Association released Thursday. .

The average increase since the start of 2020, before the pandemic, is 16%. This stands in sharp contrast to the unprecedented impact on broader economic activity in the UK.

“Despite maintaining a breakneck pace for most of the year and facing the Omicron variant, the rate of increase in price still reached a sprint end,” said Jonathan Hopper, managing director of Garrington Property Finders.

The price of a typical UK home rose to a record high of £254,822, up £23,902 on the year, the biggest increase recorded in a year in cash value since Nationwide began data collection in 1991.

“Demand has remained robust in recent months, despite the end of the stamp duty holiday in late September,” said Robert Gardner, Nationwide chief economist, Robert Gardner. . “At the same time, home supply in the market remained very low throughout the year, which contributed to the strong rate of price growth.”

In December, instructions were particularly sparse, as a surge in Covid-19 cases prompted many sellers to stop listing their homes, according to Hopper.

The graph shows the average monthly house price

Lucy Pendleton, estate specialist at independent estate agents James Pendleton, said: “Despite the Bank of England rate hike in December, “borrowing costs have remained low while the price of everything has remained low,” said Lucy Pendleton. other things increase”.

House prices rose at a double-digit pace despite London recording a weaker 4.2% year-on-year growth in the three months to December, a third or less the rate for Wales, Northern Ireland and the South East , reflecting increased demand for larger homes. in less crowded places following the rise of work from home.

However, Gardner predicts that the housing market “will slow down next year,” as the stamp duty holiday encourages more people to switch to home purchases to avoid the extra tax. Higher interest rates and a weaker labor market due to a variant of the Omicron coronavirus could also underpin slowing growth momentum.

What’s more, home price growth has outpaced income growth during the pandemic, leading to price-to-income ratios rising to their highest levels since records began in 1983, the data showed. Nationwide shows.

The graph shows the house price-to-income ratio

According to national calculations, in London the average deposit is now £88,000, or 183% of the capital’s average annual income, a sharp increase from a decade ago.

As a result, “another year of double-digit price increases seems unlikely,” Hopper said.

However, the housing market could surprise expectations in 2022 like this year, Gardner said.

“The market remains remarkably dynamic, and changes in housing preferences due to the pandemic are likely to continue to support activity and price gains,” he noted. “Indeed, the Omicron variant could help underpin a shift in preference in the near term.”

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