House price growth surges to 6.5% in November but experts warn of ‘potential downside’

House prices: Chartered Surveyor discusses impact of lockdown

Nationwide’s latest house price index revealed annual house price growth accelerated last month despite tougher coronavirus restrictions and England’s second lockdown. The latest figures also suggest house prices rose by 0.9 percent month-on-month, following a 0.8 percent rise in October. Last month, it was reported the average British home cost £229,721 compared with October’s average price of £227,826.

Despite the coronavirus pandemic stagnating the property market at the beginning of the year, pent-up demand and the government’s stamp duty holiday on properties valued below £500,000 has meant house prices are £13,897 higher than last year.

Nationwide’s Chief Economist Robert Gardner said economic growth slowed from 6.3 percent in July to 2.2 percent in August to 1.1 percent in September.

Mr Gardner added: “Rising infection rates and tighter social restrictions will have resulted in a further hit to growth in October and November.

“Labour market conditions also weakened with the unemployment rate rising to 4.8 percent in the three months to September – still low by historic standards, but up from an average of 3.8 percent in 2019.

“The extension of the furlough scheme to March 2021 will help limit job losses in the short term by enabling firms to retain more staff than they would have done otherwise.”

However, October saw property sales rise to their highest level since 2016 with mortgage approvals at their highest level since 2007.

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The property market’s continued boost will depend on the coronavirus pandemic and what measures are to follow in the future.

According to Mr Gardner, the stamp duty holiday will “continue to provide a near term boost by bringing purchases forward” but could cause the market to slow when the SDLT holiday ends in March.

Mr Gardner is not the only property expert who is concerned the end of the stamp duty holiday in March 2021 could cause problems for house buyers.

Managing Director of Barrows and Forrester, James Forrester, explained although the stamp duty holiday has resulted in “unprecedented levels of demand”, it could lead to a “downside”.

Mr Forrester continued: “The downside to this huge market revival is the potential that many could miss the stamp duty holiday deadline as the industry struggles to cope with such heightened levels of activity.

“However, for the time being, this is unlikely to slow a market that has built some serious momentum in a few short months and will continue to do so right through until the deadline next March.”

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Head of Mortgages at online mortgage broker Trussle, Miles Robinson, said the stamp duty holiday is an “attractive incentive” to buy a house during a pandemic but many people might be “too late” to benefit from the holiday.

He said: “Although the holiday is in place until March 31 2021, unfortunately for many, it might be too late to benefit from the tax relief, with processing delays due to the unprecedented level of demand.

“While the outlook is still uncertain, the next few months could mark a turning point and we may see the high number of transactions begin to fall.”

But Mr Robinson said there is a “silver lining” for those who miss the stamp duty holiday deadline.

He continued: “The silver lining for those who do miss out on the stamp duty holiday is that if demand for properties falls, so could house prices.

“This could be beneficial for first-time buyers, especially now that high loan-to-value mortgage products are also returning to the market, with 80 90 percent LTV mortgages now available. As such, things still could level out.

He added: “We’re also encouraging those who are concerned about their finances to keep an eye on their current mortgage. Mortgages are often the biggest monthly bill that people face and it’s worth using a remortgage calculator to see if switching could save you money.”

But Director of Benham and Reeves, Marc von Grundherr, said a surge in mortgage approvals and house prices rising “aren’t indicators of a market running low on steam”.

He added “as we approach the festive period, we can expect to see this momentum carry through until spring of next year, at the very least”.

Nationwide’s latest house price index also revealed a change in demand when it comes to homes.

The company’s market research suggested almost 30 percent of those looking to move wanted to have access to a garden or outdoor space with 25 percent now looking to escape the city for a quieter lifestyle.

Their recent research also suggests homes located in a national park are valued around £45,000 higher compared with identical properties in other areas.

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