Shares in leading housebuilders Barratt Developments (BDEV), Bellway (BWY), Persimmon (PSN) and Taylor Wimpey (TW.) were lifted on Wednesday by the latest Nationwide survey which showed prices rising by a record amount this month.

According to the survey, average UK house prices rose by 7.3% on an annual basis in December, the highest annual increase in six years, after an already-impressive 6.5% annual rise in November.

Source: Nationwide

DEFYING EXPECTATIONS

Housing market activity almost ground to a halt during the first lockdown as the UK economy contracted by a record 26% in the second quarter of the year. However, house prices are now more than 5% above their level in March, before the pandemic struck.

Nationwide’s chief economist Robert Gardner commented: ‘The resilience seen in recent quarters seemed unlikely at the start of the pandemic. However, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.’

The furlough scheme provided vital support for the labour market, while other measures have helped to keep the cost of borrowing down and banks have kept the supply of credit flowing along with mortgage approvals.

The stamp duty holiday has also stimulated housing demand by bringing forward peoples’ home-moving plans, while changes in working patterns have increased the demand for rural and detached homes while reducing the demand for flats.

By property type, detached houses have registered an average price increase of 8% this month while flats have only seen a 4% price increase. By region, price rises are greatest in the East Midlands and the North West at over 8%.

Meanwhile, prices in the Outer South East region - which includes smaller cities such as Brighton, Oxford and Southampton - are also up close to 8% as people continue to search for properties outside of major hubs like London.

LESS ROSY OUTLOOK

‘Behavioural shifts as a result of Covid-19 may continue to provide support for housing market activity, while the stamp duty holiday will continue to provide a near-term boost, but the outlook remains highly uncertain’, cautions Gardner.

‘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’, he adds.

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Issue Date: 30 Dec 2020