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House prices rise 10pc but market ‘close’ to pre-crash levels

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Estate agents UK house prices Nationwide
Estate agents UK house prices Nationwide

House prices have risen 10pc in the past year but lender Nationwide has warned that the volume and value of sales is now similar to 2007, just before the market crashed.

The average house price rose 0.9pc in November, to hit an average of £252,687, up £2,367 from the previous month. The average home is now worth 10pc more since November 2020 and 15pc since the pandemic began.

While the figures provide good news for homeowners, Nationwide sounded caution on market activity. The number of sales this year has already surpassed 2020 figures and was now "tracking close" to the number seen at this stage of the year in 2007, just before the financial crisis.

Nationwide's Robert Gardner said: “Activity has been extremely buoyant in 2021. The number of housing transactions so far this year has already exceeded the number recorded in 2020 with two months still to go.

"Moreover, underlying activity appears to be holding up well. If this is maintained, housing market conditions may remain fairly buoyant in the coming months."

Lucy Pendleton of estate agent James Pendleton said that fewer people than usual were putting off their home move for Christmas this year.

"The rush to beat rate rises is fueling an unusually busy market," she said. "Mortgage approvals are still running hot as a result so we’re bracing ourselves for an unusually intense December."

Mr Gardner warned there could be trouble ahead for the market. It was unclear what effect the omicron variant would have on the market and consumer confidence was "well below" the levels seen in the summer, partly as a result of a sharp increase in the cost of living, he said.

Rising interest rates may also exert a "cooling influence" on the market. If the Bank of England puts up Bank Rate in response to rising inflation, this would push up mortgage rates and make it more difficult for borrowers to qualify for loans.

Mark Harris, of mortgage broker SPF Private Clients, said: "The noise around interest rate rises is likely to get louder as we head into the new year but for now it’s a mixed bag when it comes to mortgage pricing, with the cost of mortgages for those with more than a 20pc deposit still rising while mortgages for those with smaller deposits are seeing some reductions."

Other figures released by property website Rightmove showed the market was on track for its busiest year since the financial crisis and ruthless bidding wars had inflated property prices to record heights.

However, it said property prices would continue to rise in 2022 albeit not at the double-digit pace seen this year. Rightmove predicted a 5pc increase in average asking prices in 2022, thanks to an ongoing shortage of homes for sale.

Buyer demand was 40pc higher than in November 2019, with the most competitive markets found in Scotland, the West Midlands, the South West and Yorkshire and the Humber.

Capital Economics, a consultancy, has also forecast house price growth of 5pc in 2022. Previously analysts had predictions of price falls, but this changed in the wake of the Bank of England unexpectedly holding interest rates at an all-time low of 0.1pc in November.

Before the Bank’s Monetary Policy Committee meeting in November, the Centre for Economics and Business Research, another consultancy, had forecast a 2.4pc price drop in 2022. After the rate was held, CEBR revised its prediction and said it expected house prices to grow a modest 0.2pc in 2022, followed by a 1.1pc drop in 2023.

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