House prices recover from recent dip to reach new all-time high in August
House prices have recovered from the recent dip to reach an all-time high in August, according to the latest Nationwide house price index.
Annual house price growth picked up to 3.7% in August and prices are up 2% month-on-month, after taking account of seasonal factors, as momentum builds.
Commenting on the figures, 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 supportschemes wind down.
If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
Joshua Elash, director of property lender MT Finance, says:
‘These hugely positive figures further evidence the extent to which the macro economic fundamentals have been, and remain, strong.
The results reflect both pent-up demand driving higher prices but also the unprecedented level of liquidity which has been pumped into the economy by the Government over the past few months.
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.’
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.”