UK house prices see fastest growth in four years but monthly rate slows

UK house prices grew at their fastest annual rate since 2016 in October, new figures have shown, although month-on-month price growth slowed considerably.

House prices jumped 7.5 per cent in October, according to the Halifax house price index, compared to 7.3 per cent in September.

Yet growth slowed to just 0.3 per cent when looked at on a monthly basis, the slowest expansion in four months. It followed a 1.6 per cent gain in September.

Property values have shot up in the UK during the pandemic despite the worst economic downturn in living memory.

The bullish figures reflect increased demand from people seeking more space during the pandemic. On top of this, chancellor Rishi Sunak’s stamp duty holiday has fuelled the market 

“House price growth is still hurtling along,” said Nicky Stevenson, managing director at estate agent Fine & Country. “This eternal summer is simply a side-effect of sustained strong demand.”

However, analysts have warned for some time that the stellar growth is unlikely to continue. They say economic factors – such as the rising coronavirus cases and the new England-wide lockdown – are likely to eventually catch up with the market.

Many analysts also predict a sharp drop off in transactions when the stamp duty holiday – which raised the payment threshold for the tax to £500,000 – ends in March.

UK house prices could drop five per cent

There was a “broad continuation of recent trends” in October, said Russell Galley, managing director at Halifax. He said the market was “still predominantly being driven by home-mover demand for larger houses”.

Since March flat prices were up by two per cent, compared to a six per cent increase for a typical detached property, he said.

Galley warned that there could be trouble ahead for the housing market, however. He said the new England-wide lockdown was a factor, and rising unemployment another.

“We expect to see greater downward pressure on house prices as we move into 2021.”

Howard Archer, chief economic adviser to the EY Item Club, said he suspects “the current robust housing market activity and firming of prices will prove unsustainable sooner rather than later”.

“October’s slowdown in the month-on-month increase reported by Halifax hints that prices may be starting to come off the boil.”

Archer said house prices could well be five per cent lower by mid-2021 than they are now.