Annual house price growth hit 10.0 per cent last month - and is now tracking close to the level seen before the 2007 crash.
Prices rose 0.9 per cent in month-on-month terms, after taking account of seasonal effects, says the Nationwide.
As a result, house prices are now almost 15 per cent above the level prevailing in March last year when the pandemic struck the UK.
Robert Gardner, Nationwide's chief economist, says: “There have been some signs of cooling in housing market activity in recent months. For example, the number of housing transactions was down almost 30 per cent year-on-year in October.
“But this was almost inevitable, given the expiry of the Stamp Duty holiday at the end of September, which gave buyers a strong incentive to bring forward their purchase to avoid additional tax.
Gardener continues: “Indeed, activity has been extremely buoyant in 2021. The number of housing transactions so far this year has already exceeded the number recorded in 2020 with two months still to go and is actually tracking close to the number seen at the same stage in 2007 before the global financial crisis struck.”
But he says the economy is relatively robust with unemployment still modest despite the furlough scheme finishing at the end of September.
“If this is maintained, housing market conditions may remain fairly buoyant in the coming months, especially since the market has momentum and there is scope for ongoing shifts in housing preferences, as a result of the pandemic, to continue to support activity” he adds.
“But the outlook remains uncertain, where a number of factors suggest the pace of activity may slow. It is unclear what impact the new Omicron variant will have on the wider economy.
“While consumer confidence stabilised in November, sentiment remains well below the levels seen during the summer, partly as a result of a sharp increase in the cost of living. Moreover, inflation is set to rise further, probably towards 5.0 per cent in the coming quarters.”
Gardener concludes: “Even if economic conditions continue to improve, rising interest rates may exert a cooling influence on the market. Indeed, house price growth has been outpacing income growth by a significant margin and, as a result, housing affordability is already less favourable than was the case before the pandemic struck.”
In response Tom Bill, head of UK residential research at Knight Frank, says: “Gravity-defying price growth is the result of low interest rates and tight supply, which are both things we expect to reverse next year, putting downwards pressure on prices.
“Interest rates may rise more slowly if the new Omicron Covid-19 variant proves to be more serious than the early anecdotal evidence suggests while any impact on supply and demand will depend on how it compares to previous variants.”
And Jeremy Leaf, the former RICS residential faculty chief and London agency owner, comments: “Activity is returning to levels prevailing just before the pandemic struck or even a little above. These figures confirm the stamp duty holiday prompted many to bring forward buying decisions but there are plenty of others who are clearly still determined to take advantage of low mortgage rates and less frenzied conditions.
“Our recent increase in market appraisals encourages us to expect more ’normal’ trading in early 2022 and better balance between supply and continuing demand with price growth inevitably slowing, despite concerns about interest rates and Omicron.”