House prices rose at their fastest annual rate in two years in November on the back of changes to stamp duty rules.
According to data from Nationwide, house prices jumped by 3.7% year-on-year last month, up from 2.4% in October, to £268,144 on average.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager, said: “The decision not to extend the current relief on stamp duty thresholds beyond the end of March was a further blow for the market, though this is likely to lead to an uptick in house prices over the next four months as buyers race to secure a deal before the deadline to avoid a bigger tax bill.”
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The rise means house prices are just 1% below their all-time high recorded during the summer of 2022.
Robert Gardner, Nationwide’s chief economist, said: “The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.”
However, he added that “providing the economy continues to recover steadily” the underlying pace of housing market activity is likely to continue to strengthen gradually “as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth”.
Will house prices rise in 2024 and 2025?
After two years of big ups and downs, reading the future direction of house prices has been extremely difficult for analysts. Uncertainty over what will happen to inflation – particularly against a backdrop of global instability – has meant things can change rapidly, soon leaving predictions looking out-of-date.
Despite an unexpected dip in house prices in the spring – a result of the slight increase in mortgage rates – some experts are predicting that the housing market will grow over the course of 2024. This has been helped by falling swap rates as the markets are already pricing in rate cuts. Much of the future direction of house prices depends on what happens to mortgage rates. New uncertainty from the Budget tax rises has pushed mortgage rates up in recent weeks, with few rates left below 4%.
Major estate agency and property services firm Savills is among those looking positively at the remainder of the year. In its latest five-year outlook for house prices, Savills said it expects the average home to see a 2.5% increase in value over the course of 2024.
“Capacity for house price growth will remain limited until there is a more significant reduction in the cost of debt," says Emily Williams, director of research for Savills. She says the August rate cut is a "clear signal" to the market that the Bank feels it has turned a corner in the battle against inflation, "and it should give most buyers and sellers confidence that the market will improve as we head into 2025."
Knight Frank has forecast a 3% rise in average house prices this year, after previously predicting a decline.
But it has revised its 2025 forecasts downwards due to the "more adverse rate environment" in the aftermath of the Autumn Budget.
It now expects average UK house price growth of 2.5% in 2025, 3% in 2026, and 3.5% in 2027 down from its August forecast of 3%, 4% and 5%.
Over the five-year period, the agency brand expects cumulative growth of 19.3%, which compares to an equivalent figure of 20.5% three months ago.
Meanwhile, Zoopla expects house prices to have increased by 2% by the end of 2024. Looking to 2025, while it expects the rush to beat the cut in Stamp Duty thresholds in April will drag on growth, the property website expects UK house prices to increase by 2.5% over 2025.
It has predicted house price growth of 7.5% over the next three years.
Rightmove is more bullish about next year and expects asking prices to rise by 4% on average as sellers become more confident and demand hopefully grows further.
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