House prices up by 5%

According to Nationwide, annual house price growth reached 5% in September, the highest year-on-year increase for four years! Although there are some concerns that it won’t last, could this be a welcome sign of recovery in the housing sector?

Despite several pessimistic predictions made in previous months, annual house price growth is currently at its highest since September 2016, according to Nationwide’s latest House Price Index. The data has revealed annual growth reached 5% in September, up from 3.7% in August. Some industry experts, such as analysts at Reallymoving, are even predicting this growth could continue and reach 14% by November.

Despite this positive sign of growth, there are still many people calling for caution, with Simon Rubinsohn, the Royal Institution of Chartered Surveyors’ chief economist, noting several ‘contributors […] referencing the possibility of a boom followed by a bust’.

Specifically, there are growing concerns from some commentators over what may happen to the market when the stamp duty holiday ends in March 2021 and pent-up demand from lockdown works its way out of the system. For example, The Centre for Economics and Business Research has forecast a 14% plunge in house prices in 2021 after these ‘transitory’ factors disappear.

However, the new-build sector may be somewhat shielded from the potential effects of pent-up demand petering out and the end of the stamp duty holiday in March 2021. From April 2021, the help-to-buy scheme will be solely available to first-time buyers, a group which is largely unimpacted by stamp duty.

Similarly, many first-time buyers are currently struggling to get onto the property ladder due to the lack of high LTV options available. As a result, many of these buyers could be looking to re-enter the market next year after saving more towards a deposit or committing to alternative routes to ownership, such as purchasing a new-build through help-to-buy.

Ultimately, we can’t know for sure what will happen over the next 12 months and the market has defied expectations so far. But even if it is short-lived, it’s a relief to have some positive news for a change!

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