On a monthly basis, house prices in December were 0.2% higher than in November, according to the latest Halifax House Price Index.
In the latest quarter, house prices were 2.6% higher than in the preceding three months (July to September). House prices in December were 6.0% higher than in the same month a year earlier.
Russell Galley, Managing Director, Halifax, said: “Average houses prices rose again in December, stretching the current run of continuous gains to six months. However, the monthly rise of 0.2% was the lowest seen during this period and significantly down on the 1.0% increase in November. The average house price was therefore little changed, but nonetheless still reached a fresh record of £253,374.
“2020 was a tale of two distinct halves for the housing market. Following a strong start, the first half was dominated by the restrictions on movement due to COVID-19, and prices were subsequently down 0.5% at mid-year as the market effectively ground to a halt. However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday.
“All this left average prices sitting some 6.0% higher at the end of 2020 when compared to December 2019, a notably strong performance given the anticipated impact of the pandemic earlier in the year. Whilst the annual rate of inflation did fall compared to November (+7.6%) to stand at its lowest level since August, it should be noted that this also reflects a particularly strong period for house prices towards the end of 2019 as political uncertainty at that time began to ease.
“In the near-term, and with mortgage approvals still sitting at a 13-year high, there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However, with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.”
Joshua Elash, director of property lender MT Finance, added: “The housing market is booming, with transactions up for the seventh straight month and values up 6% on December of last year.
“The macro-economic disruption caused by the pandemic has been, at least temporarily, less disruptive to the property market than Brexit uncertainty and the General Election was in the previous year. The results are attributable to pent-up demand, carried over from 2019, and demand driven by a desire to take advantage of the present stamp duty holiday.
“We expect similar growth over the course of the next several months as buyers rush to meet the deadline for this tax break. The longer-term effects of the pandemic are yet to be borne out, but with vaccines being rolled out, and a Brexit deal on the table, we have a more positive outlook and now don’t expect that there will be a significant correction in house prices in 2021.”
“It is considered that the Chancellor should extend the existing deadline for the stamp duty holiday to ease the burden on the mortgage industry, which is struggling to meet present demand, particularly given the extent to which the latest lockdown will create some inefficiency.”
Thanks to low interest rates, mortgage experts believe that bargain finance could keep the momentum going throughout 2021. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Given we had two months last year when the property market was forced to close, it really is astounding that prices ended the year 6% higher when compared with December 2019.
“The availability of very cheap mortgage finance, albeit with some restrictions on high loan-to-value products, has helped fuel the surge in activity. The good news, as far as this year is concerned, is the re-emergence of 90% products, with HSBC a welcome return to the fray this week.
“Covid has given people the opportunity to focus on their housing requirements and what is important to them and their families. Proximity to the tube or a train station as offices have become less crucial is influencing moving decisions, along with the desire for more space and a garden.
“Buyers are focused to complete by the end of March and take advantage of the stamp duty holiday. It is all hands to the pump across the industry to try and get those deals through. The key is to select a good lawyer and a mortgage broker is also essential for a speedy transaction.
“We remain fairly optimistic about the outlook for the housing market and expect these trends to continue. The furlough scheme has been extended and the stamp duty holiday should be a similar moveable feast. An extension could be a variant of the current exemption and, say, only applicable to properties below a certain size.’
Jeremy Leaf, north London estate agent and a former RICS residential chairman, concluded: “Not surprisingly, the pace of house price rises started to slow in December, which is exactly what we found in our offices, as home movers were deterred by further lockdown restrictions and seasonal distractions.
“However, we recorded very few abortive sales, other than when chains had broken down or price renegotiations in response to reduced activity. Therefore, looking forward we expect the pattern to be repeated and the overwhelming majority of transactions to proceed to completion, followed by more balance between supply and demand as rollout of the vaccinations hopefully accelerates.”
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Rebecca Morpeth Spayne,
Editor, Showhome Magazine
Tel: +44 (0) 1622 823 922