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House price growth slows with New Year dip

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Written by: Owain Thomas
02/02/2021
House prices fell month-on-month in January for the first time since June as the post-lockdown surge began to ease, according to Nationwide Building Society.

The mutual’s house price index showed the average property was worth £229,748 in January – down slightly from the £230,920 in December, but still up 6.4% from the £215,897 a year ago.

The falls of 1.5% and 1.6% in May and June were due to the closure of the housing market during the first national lockdown last year.

Prices dipped just 0.2% and 0.3% in August and September 2019 during a year of otherwise largely consistent low-level growth.

Nationwide’s house price index is based on data at the mortgage approval stage.

Chief economist Robert Gardner suggested the slowdown probably reflected a tapering of demand ahead of the end of the stamp duty holiday, which prompted many people to bring forward their purchase.

“While the stamp duty holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months,” he said.

“The typical relationship between the housing market and broader economic trends has broken down over the past nine months.

“This is because many peoples’ housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.”

Housing activity slowing

Yesterday the Bank of England revealed 2020 had been the busiest year since 2007 for mortgage approvals for house purchase, despite the market being closed for two months.

And overall lending volumes only dipped 10% to £241bn from £267bn in 2019.

“Looking ahead, shifts in housing preferences are likely to continue to provide some support for the market,” Gardner continued.

“However, if the stamp duty holiday ends as scheduled, and labour market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months.”

Home ownership improving

Nationwide also analysed the latest English Housing Survey from the Ministry of Housing, Communities & Local Government (MHCLG) which showed a slight increase in the home ownership rate in 2020, to 64.6%, up from 63.8% in 2019.

It noted this was the third year in a row the home ownership rate has increased, but it remains well below the 2003 peak of 70.9%.

“Both the number of people owning their home with a mortgage and those owning outright increased compared with a year ago,” Gardner said.

“More than half of the 15.4 million households in England own their home outright, with 5.2 million aged 65 or over.”

He added: “Conversely, the number of privately rented households fell to 4.4 million from 4.6 million in 2019, resulting in a slight decline in the proportion of households that rent privately to 18.7% from 19.3%.”

However, London was the main exception with just 50% owning their own home and 28% privately renting. The capital accounts for nearly a quarter of all privately rented households, though it only accounts for 15% of all households.

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