House prices saw their largest monthly increase for two and a half years last month, the latest figures show.
The value of the average home rose by 1.2% in November, according to the latest figures from Nationwide. This was the largest monthly gain for 20 months.
On a year-on-year basis, residential property prices were up 3.7% – the biggest annual hike in two years.
The building society says that prices are now just 1% below the all-time peak recorded in summer 2022 before interest rates began heading upwards.
In cash terms, the average property is now worth £268,144.
On a non-seasonally adjusted basis, house prices rose by 0.9% between October and November.
Robert Gardner, Nationwide’s chief economist, said the rise was down to improvements in household finances.
He commented: “The price of a typical UK home rose by 3.7% year on year in November, a strong rebound from the 2.4% recorded the previous month and marking the fastest rate of annual growth for two years. House prices increased by a robust 1.2% month on month, after taking account of seasonal effects, the largest monthly gain since March 2022. House prices are just 1% below the all-time high recorded in the summer of 2022.
“The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.
“The pickup in price growth is unlikely to have been driven by upcoming stamp duty changes, since the majority of mortgage applications commenced before the Budget announcement.
“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the higher interest rate environment.
“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year. Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s (see chart).
“Gauging the underlying strength of the market will be more difficult in the coming months as the upcoming stamp duty changes will provide an incentive for buyers to bring forward house purchases to avoid paying additional tax.
“This is likely to lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. This has the potential to shift the demand/supply balance in the near term and impact price movements.
“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
Industry reaction:
Tom Bill, head of UK residential research at Knight Frank, said: “A feeling the Budget could have been worse, the prospect of a stamp duty rise next April and the dwindling availability of sub-4% mortgages have all driven activity over the last two months. The main risk facing the UK housing market now is whether Labour’s Budget will work in the long term. Any extended period of upwards pressure on unemployment, inflation and borrowing costs would put downwards pressure on house prices and transaction volumes, and we have revised down our forecasts marginally for the next three years.”
Nathan Emerson, CEO of Propertymark commented: “It’s likely that as both the confidence and affordability of buyers increase due to the easing of inflation, this has spurred on activity in the market and as a result, we are starting to see health restored in the form of steady house price growth.
“What we are likely to witness now is a further spike in activity especially for buyers in England and Northern Ireland as some rush to complete before the upcoming stamp duty rises due to commence from April 2025.”
Iain McKenzie, CEO of The Guild of Property Professionals, said: “The property market looks set for an interesting few months, with changes to stamp duty threatening to create a rush of activity in early 2025.
“Few were expecting such a strong rebound in annual house price increases, especially due to the significant challenges in the economy for many consumers.
“However, we’ve seen before that changes to property taxation tend to create a surge in transactions before implementation, followed by a quieter period afterwards. We saw this pattern clearly during the pandemic stamp duty holiday.
“This artificial deadline could create a frenzy of activity at the start of the year, as buyers race to complete before the changes take effect. However, this short-term boost is likely to be followed by a natural cooling-off period as the market rebalances.
“The underlying fundamentals of the market remain strong though, with the prospect of lower interest rates and wage growth both set to improve affordability as we move through 2025.”
Nicky Stevenson, MD at Fine & Country, remarked: “November saw a notable rise in house prices, potentially marking the last flurry of activity before the traditional Christmas lull in the property market.
“This uptick in demand — shown by rising prices both monthly and annually — could be motivated by a combination of factors, including the desire to settle into new homes before the festive season begins.
“However, the recent Autumn Budget may also be playing a significant role in this surge. In October the Chancellor confirmed that reduced stamp duty rates will end in April 2025, spurring predictions of a market boost as buyers rush to avoid higher taxes. Home movers currently pay stamp duty on properties over £250,000, but this threshold will revert to £125,000.
“First-time buyers now pay no stamp duty on homes up to £425,000, but this will drop to £300,000. These changes are driving urgency among buyers keen to complete transactions before costs rise.
‘This urgency is also reflected in the mortgage market. The number of mortgages approved for house purchases in October hit its highest level in over two years, with 68,303 approvals — a 3.3% rise from September and the fifth consecutive month of growth, according to the Bank of England.
“Looking ahead, it will be interesting to see if this demand continues into the winter months or if the market takes its usual seasonal breather. But this year’s dynamics could challenge that trend. For now, the demand remains high, buoyed by those determined to beat the clock on both tax reforms and seasonal constraints.”
Guy Gittins, CEO of Foxtons, said: “After the rate of house price growth slowed in the lead up to the Autumn Budget, the latest figures suggest the market is once again starting to accelerate.
“This consistent positivity demonstrates the current strength of the market despite the complications posed by wider economic headwinds. Over the last 12 months we’ve seen a huge increase in new buyer volumes, viewings and offers made and there is a very healthy level of stock currently on the market. So, whilst house prices are climbing, there is certainly a good level of stock for buyers to choose from and the market isn’t overheating due to the usual supply and demand imbalance.
“The market traditionally pauses for breath during the festive period, however, we’re seeing a flurry of activity driven by buyers looking to secure stamp duty relief before next April’s deadline. We anticipate the start of next year to be much the same, although those buyers who are looking to take advantage of current stamp duty relief thresholds need to be acting now to stand a chance of completing in time.”
Verona Frankish, CEO of Yopa, commented: “Whilst there may have been a momentary pause ahead of the Autumn Budget, it’s clear that market activity has accelerated significantly since then, with the driving factor being the government’s failure to extend current stamp duty relief thresholds beyond March of next year.
“As a result, we can expect a very busy end to 2024 and it’s likely that both mortgage approval levels and house prices will trend upwards as the year comes to a close.”
Marc von Grundherr, director of Benham and Reeves, added: “Nothing supercharges the property market quite like a stamp duty deadline and with the government confirming that the countdown is now on, buyers have flooded the market in hope of completing on a purchase before April next year.
“This uplift in buyer demand will ultimately push house prices up over the coming months and so if you are contemplating selling up, now is a very good time to do so.”