UK House prices have surged at their fastest pace in two years, with property values climbing by 3.7% in the year to November, reaching an average of £268,144. According to the Nationwide House Price Index, this is the steepest annual increase since November 2022, when values rose by 4.4%.
In a single month, from October to November, UK house prices rose by 1.2%, marking the largest monthly increase since March 2022. Current prices are now just 1% below the record highs observed in summer 2022.
Stamp Duty Changes Driving Market Activity
Nationwide attributed this accelerated growth partly to anticipated changes in stamp duty. The reforms, set to come into effect in April 2025, are encouraging buyers to bring forward their purchases to avoid additional tax costs.
Robert Gardner, Nationwide’s Chief Economist, noted, “Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching pre-pandemic levels despite the higher interest rate environment. The acceleration in house price growth is surprising, given that affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-COVID levels.”
The upcoming stamp duty increase was announced by Chancellor Rachel Reeves in her Autumn Statement. Second-home buyers will face a stamp duty hike from 3% to 5%, with a first-time buyer purchasing a £425,000 property incurring a £6,250 charge.
Market Reaction to Economic Conditions
Despite rising interest rates and affordability challenges, the property market has demonstrated remarkable resilience. Figures from the Bank of England reveal that lenders approved the highest number of mortgages for house purchases since August 2022.
Jeremy Leaf, a north London estate agent, commented, “In our offices, we are seeing prices hardening and stock levels rising, partly because the budget, though not particularly helpful, was not as bad as many feared.”
Nathan Emerson, Chief Executive of Propertymark, highlighted the easing of inflation as a positive factor, stating, “As both confidence and affordability of buyers increase due to the easing of inflation, this has spurred on activity in the market. As a result, we are starting to see health restored in the form of steady house price growth. We are likely to witness a further spike in activity, especially for buyers in England and Northern Ireland, as some rush to complete before the Stamp Duty rises in April 2025.”
Verona Frankish, Chief Executive of Yopa, echoed these sentiments, explaining that market activity has accelerated significantly since the Autumn Budget. Meanwhile, Ruth Gregory, Deputy Chief UK Economist at Capital Economics, noted that buyers seem undeterred by higher mortgage rates, forecasting a 3.5% house price rise in 2024 despite potential headwinds.
Implications for the Construction Sector
For the construction industry, these developments signal continued demand for housing and opportunities for growth, particularly in the lead-up to the stamp duty changes. At Exance, we remain dedicated to supporting construction businesses with tailored insurance solutions to help navigate this dynamic market.
Stay tuned to our blog for more updates and insights into the housing market and its impact on the construction sector.
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