Property market round-up - December 2020

House prices finished the year up 7.3% according to Nationwide, with their quarterly regional report showing the South East high in the rankings for the first time in years. Zoopla reports that demand in 2020 has been 40% higher than in 2019.

The big picture - house prices up 7.3% for the full year

From Nationwide Building Society -

	Dec 20	Nov 20
Monthly change	0.8%	0.9%
Annual change	7.3%	6.5%
Average price ​Not seasonally adjusted	£230,920	£229,721

Biggest regional movers - 

	Average Price Q4 2020	Dec 20 y-o-y
East Midlands	£200,951	8.6%
Outer South East	£296,291	8.0%
North West	£230,920	8.0%
Yorks and Humber	£176,925	7.7%
West Midlands	​£207.603	7.5%

Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month. Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November. House prices ended the year 5.3% above the level prevailing in March, when the pandemic struck the UK.

The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%.

But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.

Where next?
The outlook remains highly uncertain. Much will depend on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy.

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 by bringing forward home moves.

However, 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.

Robert Gardner, Chief Economist, Nationwide

The city-by-city level

The Zoopla/Hometrack Cities Index

• House price growth climbs to +3.9% expected to plateau at 5% in 2021 Q1
• Strong end to 2020 with demand and sales agreed more than 30% above last year.
• 2020 registered 40% more demand than 2019, and sales up 9% UK wide despite housing market closure of nearly 2 months.
• Strong start expected for 2021 but housing market not immune from economic factors and price growth will slow to +1% by the end of 2021.

Property prices trends move slowly, so it is no surprise that cities in Northern England, the North West and the Midlands continue to show the greatest gains.

	Average Price	Nov 20 y-o-y	Nov 19 y-o-y
Manchester	​£179,200	5.7%	3.4%
Leeds	​£175,000	5.6%	2.3%
Nottingham	​£164,800	5.4%	3.9%
Liverpool	​£126,600	5.3%	2.8%
Leicester	​£189,500	4.5%	4.2%

The annual rate of UK house price growth has moved higher to +3.9% in November up from +1.3% a year ago. The 3 month growth rate peaked at 2% in September and has slowed, suggesting annual growth will start to plateau at c.5% in 2021 Q1.

The impetus for house price growth is coming from northern England and Wales where affordability remains less of a barrier to price growth. Average prices in the North West are increasing at 5% followed by Wales and Yorkshire and the Humber, both 4.9%. At a city level, Manchester is registering growth of 5.7% followed by Leeds, Nottingham and Liverpool all recording growth over 5% per annum.

Market conditions remain strong as we move towards the Christmas break. Demand has slowed since the summer but remains 33% higher than a year ago when the General Election impacted levels of activity. Over the whole of 2020 we have recorded 40% more demand for housing than in 2019. The flow of new supply onto the market has been 4% higher than 2019 and this supply/demand mismatch explains why house price growth is increasing.

We expect a seasonally strong start to 2021 with older, equity rich, long time owning households continuing to take a growing share of sales. Improved availability of higher loan to value mortgages for those with deposits of 10% or more are already increasing which will support first time buyers in 2021.

Zoopla

All content from Nationwide and Zoopla/Hometrack
Nationwide's full report can be found here and Zoopla's here