The latest Nationwide house price index revealed that house prices rose by 2 per cent in August, reversing the losses recorded to May and June to return to a new all-time high.
According to Nationwide annual house price growth rose 2 per cent month-on-month, following a 1.8 per cent rise in July. The highest monthly rise in house prices since February 2004 where they grew by 2.7 per cent.
Overall, annual house price growth has now accelerated to 3.7 per cent from 1.5 per cent last month. This has taken the average house price in the UK from £220,935 in July to £224,123 in August.
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 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. ‘Our own research, conducted in May, indicated that around 15 per cent 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.’
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.
‘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,’ explains Gardener. ‘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.
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