According to the latest Nationwide house price index, house prices experienced their biggest monthly increase in 16 years, rising by 2% in August.
It meant annual house price growth went up 3.7%, increasing the average house price in the UK to £224,123.
Robert Gardner, Nationwide’s Chief Economist, said: “UK house prices rose by 2.0% in August, after taking account of seasonal effects, following a 1.8% rise in July. This is the highest monthly rise since February 2004 (2.7%). As a result, annual house price growth accelerated to 3.7%, from 1.5% last month.
“House prices have now reversed the losses recorded in May and June and are at a new all-time high.
“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions. This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
“Our own research conducted in May indicated that around 15% of people surveyed were considering moving as a result of lockdown. Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this point. These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward.
“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
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Joshua Elash, director of property lender MT Finance, commented that one of the factors driving the boom was the unusual level of liquidity which had been pumped into the economy by the government during recent months.
Whilst the figures may appear encouraging, Elash warned of over-optimism and the rising unemployment levels causing further implications.
“The long-term impact of the Covid-19 pandemic and resulting lockdown will not begin to be borne out in these figures until the furlough scheme has truly ended,” he said.
“Only then will we have visibility on the resulting unemployment numbers and the impact this will have on the nation’s finances and indeed the property market.”
The rise in prices has also raised concerns that additional challenges for first-time buyers could arise.
Miles Robinson, head of mortgages at Trussle, said: “For some, the home ownership journey is already challenging. First-time buyers, for example, are facing stricter criteria, with some lenders capping financial support from ‘the Bank of Mum and Dad.’
“This, in addition to the shrinking range of high loan-to-value products, is leaving many people locked out of the market.”
And Andrew Montlake, managing director at the UK-wide mortgage broker, Coreco, said: “For first-time buyers, sadly, the stamp duty holiday is largely academic as lenders are struggling to provide the mortgage finance.
“If lenders can improve in this area, that will provide additional support to the market.”
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