Figures from the just-released December 2020 edition of the Halifax House Price Index reveal that the UK’s house price growth has set a new record, despite one of the most troubling years in recent memory.
As reported last month, the average house price in the UK now exceeds a quarter of a million pounds, and despite a small 0.2% monthly increase from November’s figures, Decembers results of £253,374 were 6.0% higher than in December 2019.
According to data by the Bank of England, the number of mortgages approved to finance house purchases rose by 6.7% to 104,969 in November compared to the previous month. Year-on-year, however, the November figure was 56.4% above that of November 2019.
As shown in the image above, the annual change in house prices has been considerably high ever since the summer when the Chancellor announced the coveted Stamp Duty Holiday that would see the fee scrapped on properties under £500,000, and lowered on other properties.
It remains to be seen if the housing market will continue to be as prosperous in 2021. While the successful vaccine rollout is promising for a return to normality, there are still big questions lingering over whether the end of the stamp duty holiday will result in a slump in activity in the housing market.
In a statement released alongside the house price index, 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.”