House price growth surges to record high: Nationwide HPI

House prices have recovered from the recent dip during the Covid-19 pandemic to reach an all-time high in August, according to the latest Nationwide house price index.

Related topics:  Finance News
Rozi Jones
2nd September 2020
House sale sign sold
"Two words: reality check. As strong as the property market is right now, it will not last."

The figures show that 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 from 1.5% last month to 3.7%.

House prices have now reversed the losses recorded in May and June and are at a new all-time high.

Robert Gardner, Nationwide's chief economist, said: “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.”

Guy Harrington, CEO of residential lender Glenhawk, commented: “The speed of the market’s recovery is almost jaw dropping, with the recent stamp duty holiday and whimsical consumer behaviour seemingly turbo charging a market that looks increasingly disconnected from economic reality. The government money train cannot go on forever however. The end of furlough, which will be the trigger for winter of pain for millions, is imminent, and that’s before we even factor in a second spike. The market looks dangerously close to bubble territory; it’s a matter of if, not when, it bursts.”

Andrew Montlake, managing director at Coreco, said: “Two words: reality check. As strong as the property market is right now, it will not last.

“Demand is understandably strong after lockdown and the added bonus of the stamp duty holiday, but unemployment is rising by the day and the economic outlook is highly uncertain as the furlough scheme ends.

“In the final months of the year we will start to see a reversal in the current rate of house price growth, as the true impact of Covid-19 on the economy shows through.

“On a positive note, there are many people whose lives and jobs are largely untouched by the pandemic who will continue to move home even as the broader economic picture deteriorates.

“What we’re also seeing is a huge amount of people looking for a second property or holiday home.

"The Stamp Duty holiday has spurred more landlords into action, too, while mortgage rates in this sector of the market have never been as cheap.

“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."

Lucy Pendleton, property expert at independent estate agents James Pendleton, added: “Buyers emboldened by the stamp duty holiday have been engaged in a pitch battle for property, delivering a barnstorming recovery for the market. A stunning proportion of properties are now going for asking price or more, and offers are flooding in. It’s like lockdown was a bad dream.

“The number of buyer registrations is also holding up at a time of the year that would typically see a slowdown.

“The late summer surge is particularly apparent in London where the greatest proportion of buyers will benefit from the maximum discount of £15,000.

“For many, this emerging boom will mean paying so much more for a home that the extra cash eclipses the saving dished out by the Chancellor. That’s more likely to happen the further up the chain you go and that’s the beauty of this policy. It’s great for first-time buyers but everyone’s invited, and once people get it into their heads that they’re moving, it’s like an unstoppable force. People double down on that momentum when they then find a property they love and, armed with some extra cash, they find a way to stretch the seams of their pockets just a little bit more.

“We’re dazzled and delighted by the speed of the recovery. This is less a case of green shoots, more Britain in bloom. A record high for prices tells you all you need to know about the confidence of buyers at the moment.

“The end of the furlough scheme is still two months away but that remains the biggest threat to the UK’s economic recovery and the strength of the property market. A softer landing than hoped for the labour market in November and December could mean this bullish streak still has a long way to run.”

 

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