The latest Nationwide house price index revealed that house prices risen by 5 per cent the highest rate since 2016, reversing the losses recorded to May and June to return to a new all-time high.
According to Nationwide annual house price growth rose 0.9 per cent month-on-month, this didn’t quite match the 2 per cent rise in August, which saw the highest monthly rise in house prices since February 2004 where they grew by 2.7 per cent. However, the annual change in September showed a healthy recovering in house prices.
Overall, annual house price growth has accelerated to 5 per cent from 3.7 per cent last month. This has taken the average house price in the UK from £224,123 in August to £226, 129.
Nationwide House Price Index
The housing market was hit hard when lockdown was enforced in March, bringing the housing market to an effective standstill. 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. 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 for since the pandemic began. However, this July saw a reversal of fortunes, as house price growth 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 was a sign of the housing market starting to bounce back.
House prices in August and September have confirmed this rapid recovery. Nationwide has attributed the rapid bounce back in prices to the pent up demand following lockdown and the stamp duty holiday announced by Chancellor Rishi Sunak.
‘This rebound reflects a number of factors,’ explains Robert Gardner, Nationwide’s Chief Economist. ‘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,’ he adds. ‘Interestingly, around 10 per cent of those surveyed in September said they were in the process of moving as a result of the pandemic. With a further 18 per cent considering a move for the same reason.’
However, while Gardner says we can expect these trends to continue in the near term, thanks to the boost provided by the stamp duty holiday, they won’t hold indefinitely.
‘Indeed forecasters expect labour market conditions to weaken significantly in the quarters ahead as tighter restrictions restrictions dampen economic activity and the furlough scheme winds down,’ explains Gardener. ‘While the recently announced jobs support scheme will provide some assistance, it is not as comprehensive as the furlough scheme it replaces.’
He also points out that many are already choosing not to move during the pandemic. ‘Our own research indicates that, of the people that had been considering a move before the pandemic, 19 per cent have put their plans on hold. With over a quarter of these citing concerns about the property market.’
‘Younger people were much more likely to have put off plans than older people, which may reflect concerns about employment prospects,’ he adds.
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.