UK house prices end the year at a record high: Nationwide

Annual house price growth remained in double digits in December at 10.4%, making 2021 the strongest calendar year performance since 2006.

Related topics:  Property
Amy Loddington
30th December 2021
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According to the most recent Nationwide house price index, prices rose by 1% month-on-month, after taking account of seasonal effects.

The price of a typical UK home is now at a record high of £254,822, up £23,902 over the year - the largest rise we’ve seen in a single year in cash terms - and prices are now 16% higher than before the pandemic struck in early 2020.

Demand has remained strong despite the end of the stamp duty holiday. Mortgage approvals for house purchase have continued to run above pre-pandemic levels, despite the surge in activity seen earlier in the year. Meanwhile, the stock of homes on the market has remained extremely low throughout the year, which has contributed to the robust pace of price growth.

Nationwide's chief economist, Robert Gardner, said it was 'likely' the market would cool next year due to a combination of factors: rising interest rates, a weakened labour market due to continued Covid issues, and a fall-off after the Stamp Duty holiday, but accepted the market still had significant momentum which may change the outlook.

Gardner concluded:

“It appears likely that the housing market will slow next year, since the stamp duty holiday encouraged many to bring forward their house purchase in order to avoid additional tax. The Omicron variant could reinforce the slowdown if it leads to a weaker labour market. Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence. Indeed, house price growth has outpaced income growth by a significant margin over the past 18 months and, as a result, housing affordability is already less favourable than before the pandemic struck."

“However, the outlook remains extremely uncertain. The strength of the market surprised in 2021 and could do so again in the year ahead. The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth. Indeed, the Omicron variant could serve to reinforce the shift in preferences in the near term."

Gareth Lewis, commercial director of property lender MT Finance, says:

"The year finished on a high as far as the housing market is concerned, and in the most unpromising of circumstances given the global pandemic."

"Covid focused the minds of buyers like nothing else, persuading people to move further out of urban centres in the search for more space, aided by remarkably low mortgage rates. Unsurprisingly, house prices performed most strongly in Wales, the north of England and the south-west as working patterns changed. However, affordability in London remains incredibly stretched, making it very difficult for a young workforce to buy in the capital."

"Although many people have made their move, there is still plenty of pent-up demand, which will keep property prices high. An easing of stamp duty for downsizers looks increasingly necessary in order to encourage them to move, free up larger family homes and keep property price growth at a more manageable level."

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