"There may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March."
UK house prices ended the year at a record high, although the pace of growth is beginning to slow, according to the latest Halifax house price index.
House prices in December were 6.0% higher than in the same month a year earlier after rising 0.2% between November and December.
In Q4, house prices were 2.6% higher than in the preceding three months.
Russell Galley, managing director at Halifax, said: “Average houses prices rose again in December, stretching the current run of continuous gains to six months. However, the monthly rise of 0.2% was the lowest seen during this period and significantly down on the 1.0% increase in November. The average house price was therefore little changed, but nonetheless still reached a fresh record of £253,374.
“2020 was a tale of two distinct halves for the housing market. Following a strong start, the first half was dominated by the restrictions on movement due to Covid-19, and prices were subsequently down 0.5% at mid-year as the market effectively ground to a halt. However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday.
“All this left average prices sitting some 6.0% higher at the end of 2020 when compared to December 2019, a notably strong performance given the anticipated impact of the pandemic earlier in the year. Whilst the annual rate of inflation did fall compared to November (+7.6%) to stand at its lowest level since August, it should be noted that this also reflects a particularly strong period for house prices towards the end of 2019 as political uncertainty at that time began to ease.
“In the near-term, and with mortgage approvals still sitting at a 13-year high, there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However, with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.”