"It has hit a rate of growth not seen since the UK market roared back to life from the doldrums created by the Global Financial Crisis."
In month-on-month terms, house prices rose by 1.8% in May, after taking account of seasonal effects, following a 2.3% rise in April.
Robert Gardner, Nationwide's chief economist, said: “The market has seen a complete turnaround over the past twelve months. A year ago, activity collapsed in the wake of the first lockdown with housing transactions falling to a record low of 42,000 in April 2020. But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March.
“While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained. Our research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.
“Amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters (68%) said this would have been the case even if the stamp duty holiday had not been extended. It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.
“At the end of April, 25% of homeowners surveyed said they were either in the process of moving or considering a move as a result of the pandemic, only modestly below the 28% recorded in September last year. Given that only around 5% of the housing stock typically changes hands in a given year, it only requires a relatively small proportion of people to follow through on this to have a material impact."
Lucy Pendleton, property expert at James Pendleton estate agents, commented: “The market is hitting peak exuberance now as we enter summer. In fact, it has hit a rate of growth not seen since the UK market roared back to life from the doldrums created by the Global Financial Crisis.
“Such fierce appreciation is certainly attention grabbing but when property hits double-digit growth like this, it’s normally a brief squint at the sun before falling back down to Earth. That will probably happen in July due to the effects of a two-month interruption of house price growth last year.
“The past 12 months have been extraordinary. Average house prices burst through £220,000 for the first time in April last year, cracked £230,000 in December and have now cruised through £240,000.
“It feels like buyers have no ceiling to guide them at the moment, however the market is still split in London. The capital has been trailing the national picture on average recently and that has much to do with continued disparity between the performance of houses with gardens compared with flats and maisonettes, of which London has many.
“It is still landlords trying to cash in with low quality stock and vendors of unremarkable homes who continue to struggle. Meanwhile properties that tick all the boxes are enjoying price increases that are much more in line with the wider market’s bullish flair.
“Families are still feeling the pinch of snug properties and the walls have been bearing in on them for nearly a year and a half now. This is where the growth is coming from and there are still hordes of people chasing the dream of a big move this summer.”
Anna Clare Harper, CEO of asset manager SPI Capital, added: "Some will see 10.9% annual growth in the year to May as a boom, to be followed shortly by a bust, but what tends to happen in the housing market is different from other purchases and investments. The consequences are also different, and significant politically, economically and socially.
"In other sectors, low consumer confidence tends to reduce consumer spending, and low investor confidence tends to cause emotional selling. It is different in the housing market because homes are ‘essential’. We all need a roof over our head, so people tend not to sell unless they really need to. And, with interest rates low, it can be cheaper to pay a mortgage on an equivalent property than to pay rent, once you have put down a deposit. So a mass sell-off seems unlikely – in the absence of significant interest rate rises.
"A big cause of current house price growth is the desire for more space - and for those not moving, home renovations are on the up. This is symbolic of our rising living standards – a good thing. It is also causing inflation in the construction sector, which has profound social consequences.
"Inflation means the cost of renting, buying and improving homes are likely to continue to rise. This will continue to create widening inequalities between the ‘haves’ and the ‘have-nots’. In short, it is bad news for younger and less well-off people as it will disproportionately, but not exclusively, affect them.
"The importance of the rental market will increase – socially, politically and economically. And the importance of sound housing market policy will also increase."
