UK Housing Market May Slow Next Year – Nationwide
The UK housing market may slow next year, after a stellar 2021, with the end of the stamp duty holiday and the threat posed to the labor market by the Omicron variant of the coronavirus, the Nationwide Building Society said Thursday.
The house price index climbed 10.4 percent year-on-year in December after a 10.0 percent increase in the previous month, the monthly survey results from the group showed.
Compared to the previous month, the HPI rose 1.0 percent following a 0.9 percent gain in November. Economists had forecast a 0.5 percent increase.
“2021 was the strongest calendar year for house price growth since 2006,” Nationwide said.
The average price of a typical UK home hit a record high of GBP 254,822, rising nearly GBP 24,000 over the year, which was the largest rise in a single year in cash terms. Prices were 16 percent higher than before the Covid-19 pandemic struck in early 2020.
Wales was the strongest performing region this year, while London was the weakest. The capital was the only UK region to see lower annual price growth in 2021 than in 2020.
Demand remained strong though the stamp duty holiday ended at the end of September, and the stock of homes in the market was extremely low throughout the year, boosting prices.
Nationwide expects the housing market to slow next year as many had brought forward their housing purchase in view of the stamp duty holiday to avoid extra tax.
“Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence,” Nationwide Chief Economist Robert Gardner said.
Housing affordability is less favorable now than before the pandemic as house price growth has outpaced income growth by a significant margin over the past 18 months.
“However, the outlook remains extremely uncertain,” Gardner said.
The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth, the economist noted.
Gardner expects the Omicron variant to reinforce the shift in preferences in the near term.
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