The price of UK homes continues to increase and there are no signs of it slowing down. This month, lender Nationwide recorded the second-largest monthly rise they've seen since 2003 with an increase of 13% compared to the pre-pandemic levels.
According to new figures, house prices in the UK have experienced an unexpected surge during the month of August, despite the gradual end of stamp duty holiday season.
Price inflation has been on the rise. In July, prices declined by 0.6%.
However, according to a report from Lender Nationwide, we saw a sharp increase of 2.1% during the month of August - what could be attributed to people purchasing homes before interest rates go up again?
Effects of the Pandemic
The virus has caused a huge increase in economic activities and trade. Year-on year growth climbed to 11% with prices now around 13% higher than when the pandemic first began.
Previously, experts in the housing market had estimated that the annual growth in the sector would slow down to 8.6%.
Market analysts from Nationwide have a theory about why stamp duty holiday might still apply to some properties on the market. They say that higher-valued properties will no longer be eligible for this discount, but it would still apply to lower valued properties in the market.
Demand for housing
Demand for housing is high and supply is low, which means that this is one of that factors affecting the property prices on the housing market. Those looking to buy a house will have greater competition with other buyers.
Britain's housing market has seen an increase in activity since last summer thanks to a nil rate on stamp duty for properties worth up to £500,000 introduced by Chancellor Rishi Sunak. At the end of June, the threshold was further reduced to £250,000 and is expected to fall back down to its standard level of £125,000.
Market developments
The market eventually saw a more subdued tone as well, Nationwide reported that prices fell by 0.5% in July, but this has now been revised down to a 0.6%. The mortgage approval numbers are staggering and at an all-time low.
This news comes as the Bank of England revealed earlier this week that they had seen a one-month-long decrease for annualised mortgages during Q2 2019 - something no other country saw, except Ireland.
Robert Gardner, Nationwide's chief economist said:
"The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief at the end of June would take some heat off this market."
He further established that the month-on-month gain of 2.1% was the second largest in 15 years – followed by this year's record breaking pace which showed an increase over April at 2.3%.
Mr Gardner further revealed that the established trend of strong demand for properties in the price range of £125,000 and £250,000, would benefit those who are keen on taking the opportunity of stamp duty relief. This scheme is expected to last until the end of September.
Property prices
With low supply and an increase in demand, it is not surprising to see that August saw the highest property prices yet. The lack of properties on offer may be a key factor behind these rises with estate agents reporting few listings for sale at this time.
The supply of homes on the market appears to be scarce, with consumer confidence at an all-time high and borrowing costs still low.
A recent report from Mr Gardner said demand was likely "to remain solid" in light of these circumstances. He further stated that this year's outlook is hard to predict, especially when you factor in things like stamp duty holiday ending as well as winding down of government furloughs, which could potentially lead unemployment rates higher than before. By his account, the labour market has been surprisingly resilient during this crisis.
The pandemic might be a strain on its recovery, but even if jobs numbers begin to decline due in large part to an established preferences brought on by pandemic measures such as stay-at-home parents or working from home professionals, there are signs of positive developments.
It is logical to believe that this established trend could continue to influence the market in the future.
Source: https://www.nationwide.co.uk/
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