Robert Gardner, Nationwide's Chief Economist, explains: "Data suggests that the economic recovery had lost momentum even before the latest lockdown came into effect. Economic growth slowed sharply from 6.3% in the month of July to 2.2% in August and 1.1% in September, even though the economy was still around 8% smaller than its pre-pandemic level at that point. Rising infection rates and tighter social restrictions will have resulted in a further hit to growth in October and November.
"Labour market conditions also weakened with the unemployment rate rising to 4.8% in the three months to September – still low by historic standards, but up from an average of 3.8% in 2019. The extension of the furlough scheme to March 2021 will help limit job losses in the short term by enabling firms to retain more staff that they would have done otherwise.
"Despite these headwinds, housing market activity has remained robust. October saw property transactions rise to 105,600, the highest level since 2016, while mortgage approvals for house purchase in the same month were at their highest level since 2007 at c97,500.
"The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy. Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.
"However, housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: "These figures feel like the storm before the calm as buyers and sellers rushed to take advantage of the stamp duty holiday before the March deadline, despite continuing Covid restrictions in October, the possibility of a no-deal Brexit and economic growth stalling.
"That frenzy has been since replaced by a quieter, but just as determined mood to complete sales previously agreed. We don’t see any signs either of significant price adjustments, irrespective of whether there is an extension to the stamp duty holiday, with activity continuing to be supported by a shortage of listings and longer-term low-interest rates."
