Country property boom leads house price surge

Prices in the UK housing market are continuing to set new records with Nationwide's latest index showing the sharpest annual rise for nearly six years.

The increases appear to be affecting most regions of the UK with buyers taking advantage of the stamp duty tax holiday announced by the government after the market became effectively frozen during the coronavirus lockdown in the spring.Additionally, the market has been boosted by city-dwellers seeking properties in rural areas amid the boom in home working caused by the pandemic. Nationwide found properties in national parks now carried a 20 per cent premium, with homes bordering these areas selling for six per cent more than equivalent properties elsewhere.The building society's index said home prices last month were 6.5 per cent higher than a year earlier, with the increase between October and November running at 0.9 per cent, bringing the national average for a property to £229,721.Robert Gardner, Nationwide's chief economist, said the economic fall-out from the Covid-19 crisis had yet to be felt in the housing market with transactions in October rising 105,600, the highest level since 2016, and with mortgage approvals running at about 97,00, their highest level since 2007.But he added: “The outlook remains highly uncertain and will depend heavily 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 provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.“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."Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, described the latest data as "feeling like the storm before the calm"  with buyers and sellers rushing to take advantage of the stamp duty holiday.“That frenzy has been since replaced by a quieter, but just as determined mood to complete sales previously agreed. We don’t see any signs either of significant price adjustments, irrespective of whether there is an extension to the stamp duty holiday, with activity continuing to be supported by a shortage of listings and longer-term, low-interest rates,” he said.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, added: "A relatively narrow cohort of well-off households, who already own their homes with little debt, seem to be driving the market with the savings that they have realised this year from working from home."House prices remain vulnerable to falls next year, when the trend towards working from home will be going into reverse, stamp duty will be higher and mortgage rates still will be above their pre-Covid level, due to the weakened labour market."

Read more news and views from David Sapsted.

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