House price rises accelerate further

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House prices are now rising at a smidgeon under 11 per cent per annum, the Nationwide has estimated.

The mortgage lender’s latest House Price Index puts the annual rate of increase at 10.9 per cent, and the monthly increase at 1.8 per cent – or just under £4,400 per month on an average priced house of £242,832.

The May annual rate of house price growth was the highest for seven years, said Nationwide chief economist Robert Gardner.

‘The market has seen a complete turnaround over the past twelve months. A year ago, activity collapsed in the wake of the first lockdown with housing transactions falling to a record low of 42,000 in April 2020. But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March.

‘While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained. Our research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.

‘Amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters (68 per cent) said this would have been the case even if the stamp duty holiday had not been extended. It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.

‘At the end of April, 25 per cent of homeowners surveyed said they were either in the process of moving or considering a move as a result of the pandemic, only modestly below the 28 per cent recorded in September last year. Given that only around 5 per cent of the housing stock typically changes hands in a given year, it only requires a relatively small proportion of people to follow through on this to have a material impact. The “race for space” continues.

‘Of those moving or considering a move, around a third (33 per cent) were looking to move to a different area, while nearly 30 per cent were doing so to access a garden or outdoor space more easily.

‘Consistent with this, the majority of people are looking to move to less urban areas, with this preference particularly pronounced for older age cohorts’.

The near-term house price outlook is buoyant, said Gardner, but longer term prospects remain uncertain.

‘With the stock of homes on the market constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year. Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year, as most analysts expect, there is scope for activity to slow, perhaps sharply’.