House prices in the United Kingdom finished the year on a higher note than expected in December, as buyers shrugged off fears about rising coronavirus infections.
According to Nationwide Building Society, the average price of a home jumped 1% to 254,822 pounds ($334,090) this month, which is generally one of the quietest of the year. Economists had predicted a double-digit growth rate. The yearly growth rate accelerated to 10.4%, the highest in 15 years.
Buyers who were fed up with the pandemic’s lockdowns are snapping to more roomy residences outside of cities with space to work from home. That trend is likely to get tested in 2022 as rising borrowing costs, stretched affordability and pinched household finances restrain the ability of consumers to keep paying more.
It appears likely that the housing market will slow next year, said Robert Gardner, chief economist at Nationwide. Even if wider economic conditions remain resilient, higher interest rates are likely to exert a cooling influence. Affordability is already less favorable than before the pandemic struck.
Wales had the fastest growth rate of any region, marking the first time it had topped the survey since it began collecting data in 1973.
With a 4.2% increase, London was the worst performer, and the only U.K. region to have smaller growth in 2021 than the previous year.
The South West had the highest annual growth rate in England, at 11.5%, the highest since 2004.
The U.K.’s housing boom continues, but it’s set to cool in 2022 as interest rates edge higher and household incomes are squeezed. Still, prices are likely to be underpinned by high demand for more spacious homes and limited supply.