House Prices See ‘Surprising’ Growth in November Ahead of Stamp Duty Changes

A "Sold" sign outside a house in a row of terraced houses in Guildford, southern England, on Aug. 6, 2024. Justin Tallis/AFP via Getty Images

UK house prices in November showed “surprising” growth, reaching their most significant monthly increase in more than two years, data suggest.

This month recorded a 1.2 percent rise from October, according to market figures released on Monday by the Nationwide Building Society. The annual growth rate jumped to 3.7 percent, up from 2.4 percent in October, marking the fastest year-on-year growth since November 2022.

The average home price now stands at £268,144, just 1 percent below the all-time high recorded in summer 2022.

Commenting on the figures, Robert Gardner, Nationwide’s chief economist, said in a statement: “The price of a typical UK home rose by 3.7 percent year on year in November, a strong rebound from the 2.4 percent recorded the previous month and marking the fastest rate of annual growth for two years (November 2022).

“House prices increased by a robust 1.2 percent month on month, after taking account of seasonal effects, the largest monthly gain since March 2022. House prices are just 1 percent below the all-time high recorded in the summer of 2022.

“The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.”

Gardner attributed the “steady rise” in market activity and prices to solid labour market conditions, including low unemployment rates and strong income growth that outpaces inflation.

He added that household debt levels are in “good shape” and at their lowest relative to income since the mid-2000s, further supporting market activity.

Stamp Duty

The autumn Budget announced changes to stamp duty, set to take effect from April next year.

For first-time buyers, the nil-rate band threshold will decrease from £425,000 to £300,000, while for other buyers, it will drop from £250,000 to £125,000. These adjustments may be pushing buyers to speed up purchases before the stamp duty changes kick in.

However, Gardner believes that the current uptick in house prices is unlikely to be driven by these forthcoming changes, as most mortgage applications in November commenced before the Budget announcement.

He anticipates a surge in transactions in the first quarter of 2025, particularly in March, followed by a potential slowdown in the subsequent months, reflecting trends seen with previous stamp duty changes.

“This has the potential to shift the demand/supply balance in the near term and impact price movements.

“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth,” Gardner said.

Projections

Estate agencies have warned that rising inflation and living costs could prompt some buyers to pause plans and focus on savings.

Nicky Stevenson, managing director at estate agent group Fine & Country, said that the “true test” of the market’s resilience will come in 2025.

Iain McKenzie, chief executive of the Guild of Property Professionals, said that tax changes typically lead to a spike in transactions ahead of their implementation, followed by a slower period afterwards.

“We saw this pattern clearly during the pandemic stamp duty holiday,” McKenzie said.

The Bank of England’s recent data showed an increase in mortgage approvals in October, reaching the highest level since August 2022.

The bank has reduced interest rates twice this year, bringing the current rate to 4.75 percent, which has alleviated some pressure on borrowers. Buyer interest has been bolstered by declining mortgage rates and strong wage growth.

Matt Thompson, head of sales at estate agent Chestertons, said the current level of buyer activity will continue into 2025.

“We predict London properties to hold their value or see a gradual value increase of up to 3 percent over the course of next year.”

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “We might well see activity remain higher in the coming months, as buyers hurry to get in ahead of the end of the stamp duty holiday on March 31.

“However, as prices head to just 1 percent below their peak, and mortgage rates remain relatively high, there’s a growing chance that affordability raises its ugly head again. This could keep a lid on both sales and prices, as it just becomes too big a stretch to get onto the property ladder – or move up it.”

PA Media contributed to this report.