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House prices grow at fastest pace for 15 years

Wales has been the fastest-growing UK region and London the slowest
House prices grow at fastest pace for 15 years
  • Average UK house price rises £24,000 to £254,822
  • Growth set to continue, despite affordability and interest rate concerns

UK house prices rose by 10.4 per cent in 2021, their fastest pace for 15 years.

The average house price rose by £24,000 to £254,822, according to the Nationwide Building Society.

Prices are now 16 per cent above pre-pandemic levels as demand remained strong even after the government’s stamp duty holiday ended in September, with the stock of new homes coming onto the market remaining “extremely low”, Nationwide’s chief economist Robert Gardner said. He expects house price growth to slow next year, given that many people brought forward purchases to benefit from the stamp duty holiday.

The prospect of interest rate rises could also cool the market, as could affordability concerns. House price growth continues to outstrip wage inflation, with the latest Office for National Statistics data for October showing average weekly earnings rose 4.9 per cent year-on-year. A 20 per cent deposit for a first-time buyer home in London now costs £88,000, or 183 per cent of average gross income. This figure has climbed from 130 per cent 10 years ago.

A slowdown is by no means a certainty, though.

“The strength of the market surprised in 2021 and could do so again in the year ahead," Gardner said. “The market still has significant momentum and shifts in housing preferences as a result of the pandemic could continue to support activity and price growth.”

The robust market has propelled the valuations of many of the UK’s big listed housebuilders. Vistry’s (VTY) shares are up 34 per cent this year and Redrow’s have gained 29 per cent, while Barratt Developments (BDEV) and Bellway (BWY) shares are up 15 per cent, outperforming the 13 per cent gain in the FTSE 350 index. 

However, others such as Taylor Wimpey, which recently came under criticism from Elliott Advisors for its share price performance, and Persimmon (PSN) underperformed the index, gaining 12 per cent and 5 per cent, respectively. Berkeley Group’s (BKG) shares have fallen 4 per cent, dragged down by a comparatively weaker market in the capital. 

House price growth in London was the slowest of any UK region, up 4.2 per cent. Wales was the region with the fastest growth, with average house prices gaining 15.8 per cent.