House Prices – Oct / Nov 2020

House prices have continued to rise year on year according to various sources. However, are there signs that prices are beginning to fall?

Annual House Prices

According to the Halifax House Price Index, annual house prices increased in October by 7.5% when compared to the same period last year. The Halifax Report states that this is the strongest growth since 2016.

In comparison, the Nationwide House Price Index reported that annual house prices had increased by 5.8%. The highest rate since January 2015.

Although these reports have differing data, the message is the same in terms of annual house prices.

Month-on-Month

So contrary to many predictions, the annual house price numbers make good reading. However, the month on month growth is slowing.

The Halifax report states that ‘month-on-month price growth slowed considerably (in October), down to just 0.3% compared to 1.5% in September.’

The Nationwide report states “Data suggests that the economic recovery has lost momentum in recent months with economic growth slowing
sharply to 2.1% in August, down from 6.4% in July.”

The Rightmove House Price Index November report states, “Average price of property coming to market dips by 0.5% (-£1,505) from last month despite continuing strong buyer demand as new sellers join the rush to sell and beat the March stamp duty deadline.”

Predictions

So these reports suggest that house price growth will slow. Others have predicted a fall in house prices in 2021.

The Nationwide report states, “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”

The Halifax report goes on to say, “While Government support measures have undoubtedly helped to delay the expected downturn in the housing
market, they will not continue indefinitely.” It goes on to say, “With a number of clear headwinds facing the housing market, we expect to see greater downward pressure on house prices as we move into 2021.”

This sentiment is backed up by Reallymoving who report that the new year will herald the start of falling house prices after a Christmas peak. Apparently fellow mortgage professionals also feel that house prices will fall next year.

So the general consensus from many is that prices will fall back if things stay as they are. The financial impact of COVID-19 setting in, unemployment rising and the stamp duty holiday ending can be reasons to support this. This all makes perfect sense.

However, if we’ve learned anything, it’s that things don’t stay the same. Will the stamp duty holiday be extended? Will the availably of 90%+ mortgages come back into force? Will there be an impact on house prices as a result of another £150bn worth of quantitative easing? (in addition to the huge amount of QE already pumped in to the economy). Will there be any other measures brought in?

Only time will tell.

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