"It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present."
Prices rose 0.3% month-on-month, reversing the small decline seen in January. The average house price of £231,061 is now the highest on record.
Robert Gardner, Nationwide's chief economist, said: “February saw the annual rate of house price growth rebound to 6.9%, from 6.4% in January. House prices rose by 0.7% month-on-month, after taking account of seasonal effects, more than reversing the 0.2% monthly decline recorded in January.
“This increase is a surprise. It seemed more likely that annual price growth would soften further ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase.
“While the stamp duty holiday is not due to expire until the end of March, activity and price growth would be expected to weaken well before that, given that the purchase process typically takes several months (note that our house price index is based on data at the mortgage approval stage).
“It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present. Shifts in housing preferences may also be providing a more significant boost to demand, despite the uncertain economic outlook.
“Many peoples’ housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.
“As a result, the outlook for the housing market is unusually uncertain. There is scope for shifting housing preferences to continue to boost activity, especially if there is further policy support in the Budget. Nevertheless, if labour market conditions weaken as most analysts expect, it is likely that the housing market will slow in the months ahead.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "After a softening in prices in January, values ticked up again in February as buyers continued to push through in an attempt to benefit from the stamp duty holiday. On the mortgage side, business was brisk with borrowing remaining strong as buyers took advantage of continued low interest rates.
"After months of getting to grips with working from home and increased demand from buyers motivated by the stamp duty holiday, lenders appear to be in a much better place service-wise. Their overall confidence in the market as the vaccination programme is rolled out and we slowly emerge from this latest lockdown, means we have seen a welcome broadening of criteria in some areas.
"With the market showing little sign of slowing down, the Chancellor’s expected Budget announcement on 95% mortgages and an extension to the stamp duty holiday will only fuel demand and activity, in all likelihood pushing prices up higher."
Jeremy Leaf, north London estate agent and former RICS residential chairman, added: "The rebound in prices doesn’t surprise me. On the ground, we have seen the pre-Christmas home-buying frenzy replaced by measured decision making in a market where supply and demand is becoming more balanced. A combination of better weather, positive Budget prospects, vaccination rollout and easing of lockdown restrictions, is adding to optimism, irresepctive of the ending of the stamp duty holiday in March.
"As a result, I expect to see a dip in transaction numbers in the short term but in the medium term more activity, particularly as sellers are increasingly tempted to put their properties on the market, reflected in recent higher market appraisal numbers."
