House prices rose at their fastest rate for two years in November climbing 3.7% year on year, latest data from Nationwide reveals.
And house prices increased by 1.2% month on month, the largest monthly gain since March 2022 and placing them just 1% below the all-time high recorded in the summer of 2022.
The lender said that solid labour market conditions, with low levels of unemployment and strong income gains, had helped underpin a steady rise in activity.
Household balance sheets are also in good shape, it pointed out, with debt levels at their lowest levels relative to household income since the mid-2000s.
SURPRISING ACCELERATION
Robert Gardner, Nationwide’s Chief Economist, says: “The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.
“The pickup in price growth is unlikely to have been driven by upcoming stamp duty changes, since the majority of mortgage applications commenced before the Budget announcement.
“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the higher interest rate environment.”
STAMP DUTY CHANGES
But Gardner warns that going forward the upcoming stamp duty changes are going to make it harder to gauge the underlying strength of the market as buyers rush to beat the tax hike.
He says: “This is likely to lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. This has the potential to shift the demand/supply balance in the near term and impact price movements.
“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
CONFIDENCE AND AFFORDABILITY
Nathan Emerson, Chief Executive of Propertymark, says: “It’s likely that as both the confidence and affordability of buyers increase due to the easing of inflation.
“This has spurred on activity in the market and as a result, we are starting to see health restored in the form of steady house price growth.
“What we are likely to witness now is a further spike in activity especially for buyers in England and Northern Ireland as some rush to complete before the upcoming stamp duty rises due to commence from April 2025.”
PRE-BUDGET WOBBLE
Jonathan Hopper, Chief Executive of buying agent Garrington Property Finders, says: “The property market has blown through its pre-Budget wobble to end the year on a roll.
“With both average prices and activity rising, and the Bank of England cutting its Base Rate again, the mood in November was more upbeat than the anxious and halting sentiment seen in October.
“Even though many mortgage lenders have yet to pass on the latest Base Rate cut to new borrowers, some would-be buyers are being spurred into action by the realisation that cheaper mortgages are on their way.
“We’re also seeing the first signs of another ‘stamp duty stampede’ as many first-time buyers race to complete their purchases before the stamp duty thresholds change at the end of March.
“The buoyancy at the lower end of the market is not universal.”
But he adds: “The buoyancy at the lower end of the market, in which some first-time buyers are viewing in haste and offering high in order to secure a home before the tax changes take effect, is not universal.
“It’s a very different story higher up the market, where wealthy buyers are licking their wounds from the Budget and sentiment is settling only gradually.
“With plenty of supply of prime homes for sale, buyers at this end of the market are likely to find themselves spoilt for choice and able to negotiate hard on the price they pay – and this is holding price inflation firmly in check.”
DRIVING FORCE
Guy Gittins, Foxtons Chief Executive, says: “After the rate of house price growth slowed in the lead up to the Autumn Budget, the latest figures suggest the market is once again starting to accelerate.
“This consistent positivity demonstrates the current strength of the market despite the complications posed by wider economic headwinds.
“Over the last 12 months we’ve seen a huge increase in new buyer volumes, viewings and offers made and there is a very healthy level of stock currently on the market.
“There is certainly a good level of stock for buyers to choose from and the market isn’t overheating.”
“So, whilst house prices are climbing, there is certainly a good level of stock for buyers to choose from and the market isn’t overheating due to the usual supply and demand imbalance.
“The market traditionally pauses for breath during the festive period, however, we’re seeing a flurry of activity driven by buyers looking to secure stamp duty relief before next April’s deadline.
“We anticipate the start of next year to be much the same, although those buyers who are looking to take advantage of current stamp duty relief thresholds need to be acting now to stand a chance of completing in time.”
MAIN RISK
Tom Bill, head of UK residential research at Knight Frank, says: “A feeling the Budget could have been worse, the prospect of a stamp duty rise next April and the dwindling availability of sub-4% mortgages have all driven activity over the last two months.
“The main risk facing the UK housing market now is whether Labour’s Budget will work in the long term.
“Any extended period of upwards pressure on unemployment, inflation and borrowing costs would put downwards pressure on house prices and transaction volumes, and we have revised down our forecasts marginally for the next three years.”
HOLDING VALUE
Matt Thompson, Head of Sales at Chestertons,says: “November’s property market saw an increasing number of first-time buyers who were and still are motivated to purchase a property before the stamp duty changes in April 2025.
“This, in addition to high demand from house hunters in general, led to more sales being finalised than in November of last year.
“With the current level of buyer activity expected to continue well into the new year, we predict London properties to hold their value or see a gradual value increase of up to 3% over the course of next year.”
SUPERCHARGED MARKET
Marc von Grundherr, Director of Benham and Reeves, says: “Nothing supercharges the property market quite like a stamp duty deadline.
“With the government confirming that the countdown is now on, buyers have flooded the market in hope of completing on a purchase before April next year.
“This uplift in buyer demand will ultimately push house prices up over the coming months and so if you are contemplating selling up, now is a very good time to do so.”
PRICES HARDENING
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “In our offices we are seeing prices hardening and stock levels rising, partly because the Budget, though not particularly helpful, was not as bad as many feared either.
“As a result, some pent-up demand was released and buyers are digging a little deeper. That extra choice, as well as broad acceptance that inflation and mortgage rates will not reduce as far and as fast as many expected, has meant caution still prevails.
“Transaction lengths are extending too, particularly bearing in mind the seasonal distractions so sellers still need to be extra competitive to attract serious attention at this time of year.”
AFFORDABILITY CHALLENGES
Amy Reynolds, Head of Sales at Richmond estate agency Antony Roberts, says: “Further increases in average house prices come as a surprise, considering the affordability challenges and reduced demand in some regions.
“Those areas with limited stock, such as the Richmond Borough, are seeing prices hold firm.
Homes that are well priced and well-presented are still selling relatively quickly; while buyers may pause to assess financial implications, high-demand areas are likely to retain interest.”
TRENDING UPWARDS
And Verona Frankish, Chief Executive of Yopa, says: “Whilst there may have been a momentary pause ahead of the Autumn Budget, it’s clear that market activity has accelerated significantly since then, with the driving factor being the government’s failure to extend current stamp duty relief thresholds beyond March of next year.
“As a result, we can expect a very busy end to 2024 and it’s likely that both mortgage approval levels and house prices will trend upwards as the year comes to a close.”
