House prices rose faster than expected in December to record their biggest annual increase in six years, as tax incentives and COVID-driven appetite for larger homes continued to boost demand, mortgage lender Nationwide said.

House prices rose by 0.8% in December alone, barely slowing from the 0.9% recorded in November, and were 7.3% higher than a year earlier.

Commenting on the figures, Robert Gardner,
Nationwide’s Chief Economist, said:

“Annual house price growth accelerated further in December, reaching a six year high of 7.3%, up from 6.5% in the previous month. 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.

“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.

“The furlough and Self Employment Income Support schemes provided vital support for the labour market, while a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing1. The stamp duty holiday also stimulated housing demand, by bringing forward peoples’ home-moving plans. Lenders also responded by offering payment holidays to borrowers impacted by the pandemic, helping people stay in their homes rather than potentially being forced to sell.

“The pandemic itself also boosted activity, as life in lockdown and changes to working patterns led many to re-evaluate their housing needs. Our research earlier this year indicated increased demand for less densely populated locations and different property types. This helps to explain why detached properties have seen greater price gains in recent quarters, while flats have underperformed

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