The Nationwide Building Society has reported that annual house price growth reached a five-year high in October.
Annual growth reached 5.8% in October, the highest rate since January 2015.
Month-on-month, the seasonally adjusted figures showed that prices were up 0.8%.
Robert Gardner, the Nationwide’s chief economist, said: “Annual house price growth rose to 5.8% in October – its highest level since January 2015. UK house prices rose 0.8% month-on-month in October after taking account of seasonal effects, following a 0.9% rise in September.
“Data suggests that the economic recovery has lost momentum in recent months with economic growth slowing sharply to 2.1% in August, down from 6.4% in July, despite a strong boost to the hospitality sector from the Eat Out to Help Out scheme, which has since expired.
“Labour market conditions also weakened with the unemployment rate rising to 4.5% in the three months to August – still low by historic standards, but up from an average of 3.8% in 2019.
“Nevertheless, housing market activity has remained robust. Mortgage approvals for house purchase climbed to 91,500 in September – the highest level since 2007.
“The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy. Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.
“However, 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.
Nicky Stevenson, managing director at national estate agent group Fine & Country, added: “All the signs have been there lately to suggest this hot streak had further to run and homeowners aren’t being disappointed. For annual growth to hit a five-year high in October, a month that normally sees demand cool off ahead of Christmas, is staggering.
“Outsized demand in July and August has been used as a spring board to deliver an Indian Summer for valuations, with the market charging headlong through the first two months of autumn.
“The country has never experienced a market like this. For the time of year, it is completely atypical and it will be fascinating to see how buyers navigate the festive season. The only slight word of caution is that, because this data is based on mortgage approvals, it is possible that some of these deals could fall through due to the high number of transactions slowing the conveyancing process, threatening to strip buyers of their stamp duty tax break.
“Larger more expensive homes are still powering this trend. The £15,000 gift from the Chancellor to anyone spending more than half a million pounds may not necessarily be enough to shift people’s affections to even larger properties, but the psychological effects of incentives like these apply universally, no matter the budget. The perception alone that extra demand is being stoked is enough to focus minds and encourage those planning to to buy to move with greater urgency. However, no one should expect this rate of increase to continue into the New Year as there are just too many practical and economic headwinds.”