House prices surged by 7.6 per cent to £253,243 in the year to November, putting growth on the strongest run since 2004, the latest index from Halifax has shown.
Much of this growth has taken place since June, with prices increasing by an average of £15,000 or 6.5 per cent in this time, marking the most substantial jump over five months for 16 years.
Annual growth was at its highest level since June 2016, while the month-on-month increase of 1.2 per cent, was up from 0.3 per cent in October.
These gains have more than wiped out the average savings from the stamp duty holiday.
Furthermore, the deteriorating economic picture points to a slowdown in the housing market next year, Halifax warns.
Halifax managing director Russell Galley says: “With mortgage approvals at a 13-year high, the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.
“And while industry data shows agreed sales and new instructions to sell fell to their lowest level in the past five months, both remain at historically high levels and well above seasonal norms.”
Galley says that house price inflation for home movers is running at 7.9 per cent, which is much higher than the 5.8 per cent annual growth in prices for first-time buyers.
This is probably driven by the March stamp duty deadline as those with higher value properties have more to gain from the tax break.
Galley adds: “It is interesting to note that the stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.
“The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year.
“However, the economic environment continues to look challenging.
“With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.”
North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf says: “These latest figures show how resilient the housing market has been even at a time of further Covid restrictions and economic concerns.
“However, activity has reduced since, as Christmas is proving an even greater distraction.
“There is no real sign that home buying and selling won’t resume in the early new year, albeit at a slightly slower pace as the prospects of taking advantage of the stamp duty holiday recede.
“There have been few withdrawals from previously-agreed sales and prices are holding up well, supported by the continuing shortage of the right properties at the right prices in the right locations.”
Trussle head of mortgages Miles Robinson adds: “Although the stamp duty holiday is in place until March 31 2021, for many it could be too late to benefit from the tax relief, as mortgage lenders, surveyors and solicitors battle with a bottleneck of transactions, limited capacity and a local restriction tier system.
“Alongside the end of the stamp duty holiday, March 2021 is also scheduled to see the current furlough scheme come to an end.
“With the UK unemployment rate rising by 4.8 per cent in the three months to September, redundancies reaching a record high and the economic uncertainty of a Brexit deal, it’s likely the industry will be impacted.
“While the market has avoided the level of restrictions put in place during the first lockdown, we should still remain cautious of an upcoming fall in house prices and demand.
“We would also encourage the Government to consider granting the stamp duty holiday to anyone who has exchanged on a property by March 31, as opposed to only those who complete by that date.
“We believe this will help to avoid a flurry of buyers withdrawing from transactions in the Spring and is the fairest way to support the market during these challenging times.”
