House prices hit historic high in August

September 2, 2020 / Isla MacFarlane
House prices hit historic high in August

According to the latest Nationwide House Price Index, annual house price growth picked up to 3.7% in August. Prices were up 2% month-on-month, after taking account of seasonal factors, as momentum builds.

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.”

Indeed, while these figures provide some much-needed confidence, industry veterans are reserving some of their enthusiasm.

Joshua Elash, director of property lender MT Finance, said: “While the news is positive, we would warn against over-optimism. 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. 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.”

Mike Scott, Chief Property Analyst at estate agency Yopa, added: “There are likely to be some headwinds this autumn as the furlough scheme ends and unemployment rises, but we nevertheless expect that the market will remain strong and active for the rest of this year, as people rush to beat the stamp duty deadline.”

Nonetheless, there are those that believe the property market will continue to defy expectations. Director of Benham and Reeves, Marc von Grundherr, said: “The demise of the UK property market has been greatly over prophesied in recent months and these latest figures are yet further proof that it will take far more than a period of muted activity to alter its impenetrable nature.

“With many home buyers and sellers presenting two fingers to COVID, we should see this positivity prevail over the coming months and such heightened levels of demand will also start to show where transactions are concerned.

“Once transactions start to regain stability, it will be the final nail in the coffin for many property market naysayers who will have no choice but to return to their darkened rooms, only to emerge during the next property price wobble with their regurgitated claims of market collapse.”

Managing Director of Barrows and Forrester, James Forrester, added: “Those questioning the resilience of the UK property market should be well and truly silenced by now, as the largest rate of monthly price growth in sixteen and a half years is far from a coincidence or a one-off set of freak results.

“In fact, it’s the latest in a long line of data-based reports that shows the market has turned quicker than a pint of milk in the mid-day sun, rebounding from the depths of pandemic decline seen early in the year to return to very good health, all things considered.”

The news follows figures released by the Bank of England yesterday, which showed that mortgage approvals were on the way up.

Group CEO of Enness Global Mortgages, Islay Robinson, said: “Yet more positive figures to reinforce yesterday’s news from the Bank of England that buyer demand is booming and they are returning to the market in their droves with serious intent to purchase.

“While some lenders may be tightening their belts in anticipation a bump further down the road, this certainly isn’t the case across the board and many remain happy to facilitate buyers at all levels of the market.

“With the cost of borrowing remaining very favourable, and with the added carrot of a stamp duty holiday, many buyers continue to scramble to secure a purchase in what remain some of the most favourable conditions available.”

Indeed, while the spectre of mass redundancy looms on the horizon in October, many potential house buyers have saved money during lockdown. Disposal income has been channeled into deposits or funds for a bigger and better home, rather than travel and nights out.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “This year, many people didn’t get to go on their summer holidays – for obvious reasons – stayed home and bought property instead. House prices subsequently rose to an all-time high in August, reversing the losses in May and June.

“Lenders are keen to lend although are preferring those with bigger deposits or similar levels of equity in their home, and continue to offer those borrowers the best rates. It remains tough for first-time buyers relying on the Bank of Mum and Dad or those with small deposits to get the mortgage they need, with fewer lenders offering high loan-to-value products, at higher rates.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, concluded: “The Nationwide data continues the trend noticed in July with the property market emerging strongly from lockdown. In fact, property prices accelerated in August they began to take into account not only pent-up demand but the stamp duty holiday announced in July.

“Certainly, we are seeing more buyers and sellers shrugging off concerns about rising unemployment and the unwinding of the furlough scheme, continuing to benefit from low mortgage rates and plenty of product choice.

“Looking forward, we see no signs of activity easing off. On the contrary, the recovery seems to be fairly broad-based and will be given another lift by schools and more businesses re-opening.”

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