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House market ends 2021 on a high

House prices ended 2021 more than 10 per cent higher than at the start of the year, and on an upward trajectory. This is according to mortgage lender Nationwide’s latest house price index.

‘Annual house price growth remained in double digits in December at 10.4 per cent, making 2021 the strongest calendar year performance since 2006, commented Nationwide chief economist Robert Gardner.

‘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’.

Gardner noted that demand had remained strong in the months leading up to the year-end, leading to a 1 per cent increase in prices between November and December alone. And this was despite the ending of the pandemic-induced stamp duty holiday at the end of September. Mortgage approvals for house purchase had continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year.

‘Indeed, 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’, he said.

Even so, ‘it appears likely that the housing market will slow next year, since the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax. The Omicron variant could reinforce the slowdown if it leads to a weaker labour market. Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence’.

Another factor is that house price growth has significantly outpaced income growth over the past 18 months. ‘As a result, housing affordability is already less favourable than before the pandemic struck’.

But Gardner admitted that ‘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’.

According to Nationwide, Wales ended the year as the strongest performing region, with house prices up 15.8 per cent year-on-year. England saw prices increase by 9.0 per cent, with the South West as the strongest performing region, recording annual price growth of 11.5 per cent.

‘London was again the weakest performer, with annual growth of 4.2 per cent.

• Property portal Rightmove said it predicts that the national asking price of a house will rise by 5 per cent next year. ‘This is because we’re still seeing a huge number of home-hunters looking to move, and not enough homes available to buy, so the imbalance continues to push prices up’. The four most sought-after regions for buyers are Scotland, the West Midlands, the South West and Yorkshire and the Humber, said Rightmove. ‘We predict these areas are likely to see a higher rate of 7 per cent price growth next year’.