"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."
- Robert Gardner, Nationwide's chief economist
UK house prices 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, the latest Nationwide house price index shows.
House prices also increased by a robust 1.2% month-on-month, the largest monthly gain since March 2022. House prices are now just 1% below the all-time high recorded in the summer of 2022.
Robert Gardner, Nationwide's chief economist, said: “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.
“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.”
Jonathan Hopper, CEO of Garrington Property Finders, commented: “The property market has blown through its pre-Budget wobble to end the year on a roll.
“With both average prices and activity rising, and the Bank of England cutting its Base Rate again, the mood in November was more upbeat than the anxious and halting sentiment seen in October.
“Even though many mortgage lenders have yet to pass on the latest Base Rate cut to new borrowers, some would-be buyers are being spurred into action by the realisation that cheaper mortgages are on their way.
“We’re also seeing the first signs of another ‘stamp duty stampede’ as many first-time buyers race to complete their purchases before the stamp duty thresholds change at the end of March.
“But the buoyancy at the lower end of the market, in which some first-time buyers are viewing in haste and offering high in order to secure a home before the tax changes take effect, is not universal.
“It’s a very different story higher up the market, where wealthy buyers are licking their wounds from the Budget and sentiment is settling only gradually.
“With plenty of supply of prime homes for sale, buyers at this end of the market are likely to find themselves spoilt for choice and able to negotiate hard on the price they pay - and this is holding price inflation firmly in check.”
Iain McKenzie, CEO of The Guild of Property Professionals, added: “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."
