"If house prices remain flat in month-on-month terms over the next two months, the annual rate of growth will reach double digits in June."
Annual house price growth rebounded to 7.1% in April, up from 5.7% in March, according to the latest Nationwide House Price Index.
Its data shows that prices rose 2.1% month-on-month, the biggest monthly rise since February 2004. This has pushed average house prices to a new record high of £238,831, a rise of £15,916 over the past 12 months.
Nationwide now predicts that annual growth will reach double digits in June if prices are flat over next two months.
Robert Gardner, Nationwide's chief economist, said: “Annual house price growth accelerated to 7.1% in April, only slightly below the peak of 7.3% recorded in December and up from 5.7% in March. In month-on-month terms, house prices rose by 2.1% in April, after taking account of seasonal effects, the biggest month rise since February 2004.
“Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.
“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place. For example, amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.
“Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.
“With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year. Indeed, if house prices remain flat in month-on-month terms over the next two months, the annual rate of growth will reach double digits in June.
“Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply.
“However, shifts in housing preferences may continue to support activity, even if labour market conditions weaken. Indeed, 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."
Jeremy Leaf, north London estate agent and former RICS residential chairman, commented: "The bounce-back highlighted by the Nationwide figures, which we have also seen on the ground, should be sufficient to ensure there is no price correction when the stamp duty holiday starts to taper off at the end of June. Continuing shortage of stock, as well as the new government-backed 95% mortgage and furlough support, are providing further assistance for the market.
"Broader rollout of the vaccine and easing of lockdown restrictions is increasing confidence in the economy. This economic recovery is giving an additional boost to housing market activity rather than the housing market supporting the economy, which was the case when the pandemic first struck."
Nick Barnes, head of research at Chestertons, added: “March was a record month that saw the highest transaction numbers in England ever recorded and the second highest monthly stamp duty tax take. Buyer motivation was driven by a number of factors such as wanting to beat the original deadline of the stamp duty holiday and the relaxation of lockdown restrictions. Non-resident buyers had the additional incentive to beat the deadline for the introduction of the 2% stamp duty surcharge from the beginning of April.
“Against this background, it was unlikely that March’s level of activity would be maintained and April duly saw a slight reduction in most of the key demand indicators. However, the market remains very busy by historic standards and buyers are still highly motivated to secure their new home as evidenced by the 16% reduction in the number of transactions which fell through compared to March and a 26% drop in the number of parties withdrawing from deals.”