UK Dec house prices soar, but 2022 could be slower - Nationwide
UK house prices recorded a bigger-than-expected rise in December and marked their strongest year since 2006, but there could be a cooling next year, mortgage lender Nationwide said on Thursday.
Prices in December increased by 1% month on month - compared with forecasts of 0.5% - driven by strong demand, the stamp duty tax break, and a shortage of homes on the market.
December house prices were up 10.4% year on year and the average price of a property stood at record high of £254,822.
"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," Robert Gardner, Nationwide's chief economist, said.
"Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence. Indeed, house price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck."
However, he added that 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".
"Indeed, the Omicron variant could serve to reinforce the shift in preferences in the near term."
Britain's housing market rebounded strongly after the first Covid-19 lockdown last year. Since then it has soared on the back of the government’s now-discontinued stamp duty holiday and demand for bigger properties as more people work from home.
Gardner said mortgage approvals for house purchases continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year - in the first 11 months of 2021 the total number of property transactions was almost 30% higher than over the same period of 2019.
"At the same time, the stock of homes on the market has remained extremely low throughout the year, which has contributed to the robust pace of price growth," he said.