SUMMARY

House prices rose by 0.8% in December, according to Nationwide. Total growth for 2020 was 7.3%, the highest in six years. But the end of the stamp duty holiday and rising unemployment will temper the market in 2021. Q1 is likely to be the strongest of the year, despite the latest lockdown, as buyers rush to beat the stamp duty deadline.

Most regions saw accelerating price growth in Q4 2020 compared to Q3. Over the year as a whole, the East Midlands saw the highest growth at 8.5%, followed by the North West and Outer South East, both at 8.0%. Scotland saw the lowest growth, up 3.1% over the year.

House price growth in 2020 was driven by consistently high levels of demand in the latter half of the year. Sales agreed have continued to fall from their October peak, but the number in December was still 70% higher than in 2019. Completed transactions also rose in November, 13% higher than the last year. This was supported by the highest levels of mortgage approvals in almost 14 years, exceeding 100,000 approvals in November for the second month in a row.

The proportion of First Timer Buyers (FTBs) across the market acquiring new loans fell by 2% in October, according to UK Finance. 

Higher rates and restrictions on high LTV mortgages have contributed to this. FTBs are often younger and so more exposed to current unemployment risks, while equity-rich home owners have benefited from the strong value growth this year, leading to home mover numbers overtaking FTBs in October.

Current levels of strong activity are likely to continue in the short term, despite the new national lockdown. November’s lockdown made little impact on the housing market, and assuming no further restrictions, we would expect it to continue operating with relative strength until the stamp duty holiday finishes at the end of March 2021. This is despite Oxford Economics now downgrading its Q1 2021 GDP forecast to a fall of -4%.

The average UK rent increased 1.4% over the year to November, according to the ONS. Rents grew the most in the South West, up 2.3%, and were weakest in Scotland, up 0.6%.

Annual house price growth in September was strongest in Broxtowe, Nottinghamshire, at 8.7%, followed by Mid Lothian at 8.5%. House prices fell most over the same period in Aberdeen (-3.5%), followed by Harrow (-2.5%).