Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month, according to the latest Nationwide house price index.
Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November. House prices ended the year 5.3% above the level prevailing in March, when the pandemic struck the UK.
All regions in England saw prices rise over the year, within a fairly narrow range of 5% to 9%. The Outer South East region, which includes cities such as Brighton, Southampton and Oxford, saw a significant change in fortunes – prices were up 8% in 2020, following a 1% decline in 2019.
The neighbouring Outer Metropolitan region, which includes places such as Slough, Guildford, Crawley and Chelmsford, was the weakest performing English region, but still saw prices rise by 5.6% over the year. Meanwhile, London saw a 6.2% increase, with average prices reaching their highest ever at £486,562.
The report also showed a marked rise in annual price growth in Northern England in the fourth quarter, in particular in the North West and Yorkshire & Humberside, where annual price growth increased to 8.0% and 7.7%, respectively.
Turning to the other home nations, Wales saw prices rise by 6.6%, whilst Northern Ireland saw a 5.9% increase. Scotland saw the weakest growth of the home nations, with prices only up 3.2% in 2020. This contrasts with 2019, where Scotland ended the year on top, with growth of 2.8%.
The number of mortgages approved for house purchase each month reached their highest level for a decade in October, nearly 50% above the monthly average recorded in 2019. Indeed, by the end of October, the total number of mortgages approved for house purchase in 2020 was only 7% below the total recorded over the same period in 2019.
Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said:
“The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%.
“But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.
“The furlough and Self Employment Income Support schemes provided vital support for the labour market, while a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing. The stamp duty holiday also stimulated housing demand, by bringing forward peoples’ home-moving plans. Lenders also responded by offering payment holidays to borrowers impacted by the pandemic, helping people stay in their homes rather than potentially being forced to sell.
“The pandemic itself also boosted activity, as life in lockdown and changes to working patterns led many to re-evaluate their housing needs. Our research earlier this year indicated increased demand for less densely populated locations and different property types. This helps to explain why detached properties have seen greater price gains in recent quarters, while flats have underperformed.
“Housing market conditions have remained robust in recent months, even as the wider economic recovery lost momentum and the UK economy faced the prospect of further lockdowns and continued uncertainty about the UK’s future international trading relationships."
Tomer Aboody, director of property lender MT Finance, commented:
"Although the housing market came to a complete standstill just a few months ago, quite remarkably it is finishing the year with prices at a six-year high. Pent-up demand from buyers has led to a jump in transactions and prices.
"With the government helping to prop up the market via its furlough schemes, stamp duty relief and encouragement of banks to lend, buyers have had a great ability to borrow with lowest ever mortgage rates. This has helped buyers to push to levels which potentially they couldn't achieve before and buy that bigger house they wanted.
"With the potential of these artificial factors coming to an end in March, along with Brexit, the horizon doesn't look as bright which might mean the government making some u-turn on stamp duty or possibly bringing in new reliefs."