The latest Nationwide house price index was the bearer of surprisingly good news this month as house prices showed signs of recovery growing by 1.5 per cent, after dropping for the first time in eight years last month.
The June Nationwide house price index saw the first significant drop in house prices after the lockdown. For the first time since 2012, annual house price growth fell into negative figures. Prices in June were down by 0.1 per cent annually, and down by 1.4 per cent monthly.
Nationwide House Price Index
Average house prices were hovering at £218,902 in May. However, June saw this drop to £216,403.
Despite optimism from estate agents, the drop was the bad news we have been waiting to be confirmed since the pandemic began. However, this month has seen a reversal of fortunes, as house price growth for July recovered to 1.5 per cent.
House prices rose by 1.7 percent in July, offsetting the 1.6 per cent fall in June. Although house prices were still 1.6 per cent lower than in April this year, the growth is a sign of the housing market starting to bounce back.
‘The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions,’ says Robert Gardener, Nationwide’s Chief Economist. ‘The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.’
‘Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown,’ he adds.
It is hoped that the Chancellors recent stamp duty holiday announcement will help to support recovery further. Helping more people afford to buy.
‘We expect to see a continuous boost in house prices across the UK, increased by measurements the government have put in place to support the market including the stamp duty holiday,’ commented Ross Counsell, chartered surveyor and director at Good Move. ‘However, one important thing to note is that the government must employ long-term measures to help the market truly recover.’
Nationwide’s chief economist is equally sceptical that this growth could prove to be a ‘false dawn’.
‘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,’ Robert Gardner explains. ‘If this comes to pass, it would likely dampen housing activity once again in the quarters ahead’
We can still only guess at the long-term impact of the pandemic on house prices. However, our fingers are crossed that things could be starting to look up for a quick recovery.