In November, the UK property market saw a notable rise, with house prices increasing by 1.2% compared to the previous month, according to Nationwide's House Price Index. This rise resulted in an annual growth rate of 3.7%, up from 2.4% in October, marking the fastest year-on-year increase since November 2022. Current house prices are now just 1% of the historic peak reached in summer 2022.
Robert Gardner, Nationwide's chief economist, highlighted the unexpected acceleration in house price growth, given limited affordability by historical standards. He noted that housing prices are high relative to average incomes, and interest rates remain above pre-pandemic levels.
Gardner noted that the large monthly increase, the largest since March 2022, did not appear to be influenced by anticipated stamp duty changes, as the majority of mortgage applications were initiated before the Budget announcement. Rather, the resilience of the real estate market could be attributed to the relatively high number of mortgage approvals, which are approaching pre-pandemic figures, despite higher interest rates.
To support the housing market's momentum, Gardner cited strong labor market conditions, low unemployment rates and substantial income gains, even after accounting for inflation. He also mentioned that household balance sheets are in good health, with debt levels at their lowest relative to household income since the mid-2000s.
Looking ahead, Gardner suggested that upcoming stamp duty changes could make it harder to gauge the true strength of the market. It forecasts an increase in transactions in the first quarter of 2025, particularly in March, followed by a potential slowdown in the following months, similar to trends seen after previous tax adjustments. This could temporarily shift the balance between supply and demand and affect price movements.
Gardner concluded with a cautiously optimistic outlook, suggesting that if the economy continues its steady recovery, the underlying pace of housing market activity could gradually strengthen. This would be supported by an easing of affordability constraints through a combination of slightly lower interest rates and income growth outpacing house price increases.
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