A 3.7% Annual Jump in November

House prices in the UK surged by 3.7% in November, marking the fastest annual growth since November 2022. According to Nationwide, the average price of a typical UK home now stands at £268,144, just 1% below the all-time peak recorded in 2022. Monthly prices rose 1.2%, significantly outpacing the 0.2% increase forecasted by economists.

"Solid labour market conditions and strong income growth, even after accounting for inflation, have supported this recovery," said Robert Gardner, Nationwide’s Chief Economist.

Key Drivers of Growth

1. Wage Growth and Low Unemployment
   • Strong income gains and low unemployment have improved consumer confidence, fuelling the rise in housing demand.
2. Declining Mortgage Rates
   • A decline in mortgage rates, driven by easing inflation, has revitalised the housing market.
   • The Bank of England has reduced interest rates twice in 2023, with the current base rate at 4.75%, making borrowing more affordable.
3. Strong Household Balance Sheets
   • Debt levels relative to household income are at their lowest since the mid-2000s, providing a robust financial foundation for buyers.

Mortgage Approvals Reach 15-Month High

Data from the Bank of England revealed that mortgage approvals in October were the highest since August 2022, reflecting increased buyer activity. Estate agents have reported unseasonably strong demand, particularly from first-time buyers aiming to secure properties before changes to stamp duty relief take effect in April 2025.

Stamp Duty Changes Impact Market Dynamics

At the October Budget, Chancellor Rachel Reeves confirmed the end of a temporary stamp duty holiday in March 2025. From April 2025:

• First-time buyers will begin paying stamp duty on properties worth £300,000 or more, down from the current threshold of £425,000.
• This has led many buyers to fast-track purchases to avoid additional costs.

Estate agents noted heightened activity driven by these changes:

• Matt Thompson, Head of Sales at Chestertons: "We’re seeing an increasing number of first-time buyers eager to act before the changes take effect."
• Guy Gittins, CEO of Foxtons: "There’s a flurry of activity as buyers look to secure stamp duty relief before next April’s deadline."

Outlook for the Property Market

The property market is expected to maintain momentum if economic recovery continues. Gardner cautioned, however, that gauging the market’s true strength might become more challenging in the coming months as buyers rush to complete purchases before the stamp duty changes.

"We expect the recovery to persist, provided the economy continues its steady improvement," Gardner said.

Summary

The UK housing market is experiencing a robust recovery, driven by declining mortgage rates, solid wage growth, and low unemployment. While stamp duty changes are spurring near-term demand, the long-term outlook will depend on economic stability and further government policies.

Source: (FT.com)