UK house price growth reached a six-year high, even as the rest of the economy took a hit from the coronavirus pandemic.
Data from mortgage lender Nationwide (NBS.L) showed that annual house price growth accelerated further in December, reaching a six-year high of 7.3%, up from 6.5% in the previous month.
“The resilience seen in recent quarters seemed unlikely at the start of the pandemic. Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26%, But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic,” said Robert Gardner, Nationwide's chief economist.
However, he warned that 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.”
Prices rose by 0.8% month-on-month, after taking account of seasonal effects, following a 0.9% rise in November.
House prices ended the year 5.3% above the level prevailing in March, when the pandemic struck the UK.
READ MORE: UK areas with the biggest house price rises in 2020
Annual house price growth increased in all regions in Q4 (October to December) compared with Q3 (July to September).
All regions in England saw prices rise over the year, within a range of 5% to 9%.
The outer South East region, which includes cities such as Brighton, Southampton and Oxford, saw a significant “change in fortunes,” the report said — prices were up 8% in 2020, following a 1% decline in 2019.
Meanwhile, the neighbouring outer metropolitan region, which includes places such as Slough, Guildford, Crawley and Chelmsford, was the “weakest performing” English region, but still saw prices rise by 5.6% over the year.
London saw a 6.2% increase, with average prices reaching their highest ever at £486,562 ($660,546).
Wales saw prices rise by 6.6%, whilst Northern Ireland saw a 5.9% increase. Scotland saw the weakest growth of the home nations, with prices only up 3.2% in 2020. This contrasts with 2019, where Scotland ended the year on top, with growth of 2.8%.
Gardner explained that the government’s furlough and self employment income support schemes provided vital help to the labour market, and housing activity was boosted by a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing.
The stamp duty holiday stimulated housing demand and lenders offering payment holidays to borrowers impacted by the pandemic helped people stay in their homes.
The number of mortgages approved for house purchase each month reached their highest level for a decade in October, nearly 50% above the monthly average recorded in 2019.
WATCH: Why are house prices rising during a recession?
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