UK house prices end 2020 on record high but growth slows
UK house prices ended 2020 on a record high, but the pace of growth slowed towards the end of the year, the latest figures showed.
House prices in the UK were 0.2 per cent higher in December than the previous month, reaching an average value of £253,374.
On an annual basis, property prices jumped six per cent compared to December the previous year due to the release of pent-up demand following the first Covid-19 lockdown in March, according to analysis by Halifax.
The rate of growth recorded last month slowed from the one per cent rise reported in November.
Analysts warned that the end of Help to Buy and the stamp duty holiday, combined with escalating unemployment, could have a downward impact on prices this year.
Russell Galley, managing director at Halifax, said 2020 had been a “tale of two distinct halves for the housing market.”
“Following a strong start, the first half was dominated by the restrictions on movement due to Covid-19, and prices were subsequently down 0.5 per cent at mid-year as the market effectively ground to a halt,” Galley said.
“However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday.”
He added: “With the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.”
Howard Archer, chief economic adviser to the EY Item Club, predicted that UK house prices could be five per cent below current levels by the end of the year.
“The EY Item Club suspects elevated housing market activity and robust prices will prove unsustainable sooner rather than later – although, in the immediate future, activity may still benefit from buyers keen to take advantage of the Stamp Duty threshold increase before it ends,” he said.
“There is always the possibility that the chancellor could extend the threshold increase in the March Budget.”
He added that the housing market is “likely to come under mounting near-term pressure as the economy continues to be affected by restrictions in most areas”.
“There is also likely to be a fading of the pent-up demand effect on housing market activity,” he said.