House Price Growth Increases Further

According to the Nationwide annual house price growth increased to 11% in August, from 10.5% in July. Prices rose 2.1% in month-on-month terms, after taking account of seasonal effects. House prices are now around 13% higher than when the pandemic began.

According to the Lender, the bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market. Moreover, the monthly price increase was substantial – at 2.1%, it was the second largest monthly gain in 15 years (after the 2.3% monthly rise recorded in April this year).

The strength may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, though the maximum savings are substantially lower (£2,500 compared to a maximum saving of £15,000 on a property valued at £500,000 before the stamp duty relief in England tapered).

Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books. The Nationwide concluded by stating that underlying demand is likely to remain solid in the near term.

Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices.