Post-lockdown property min-boom drives house prices to ‘all time high’

This article was featured in Mortgage Finance Gazette:

House prices experienced their biggest monthly increase in 16 years, soaring by 2% in August according to Nationwide’s latest house price index. It meant annual house price growth went up 3.7% to elevate the average house price in the UK to £224,123. Nationwide said prices had reached an ‘all time high’ having bounced back from the record low to which they plunged during the lockdown and closure of the housing market.

Robert Gardner, Nationwide’s chief economist, said it was the highest monthly rise since February 2004 (2.7%). He added: “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.”

Pent-up demand coming through and ‘behavioural shifts’ as people reassessed their housing needs following lockdown were among the factors credited for causing the dramatic rise.

Indeed, Nationwide research found 15% of people were considering moving as a result of lockdown.

But many others believed the stamp duty holiday had also played a role in the recovery. Jeremy Leaf, north London estate agent and a former RICS residential chairman, was among them. He said: “[Property prices] began to take into account not only pent-up demand but the stamp duty holiday announced in July. Certainly, we are seeing more buyers and sellers shrugging off concerns about rising unemployment and the unwinding of the furlough scheme, continuing to benefit from low mortgage rates and plenty of product choice.”

Unemployment

But, Joshua Elash, director of property lender MT Finance, said one of the factors driving the boom was the unprecedented level of liquidity which pumped into the economy by the government over the past few months and warned 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,” he said. “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.”

High LTV shortage

There were also concerns the price rises would create additional challenges for first-time buyers.

Miles Robinson, head of mortgages at Trussle, said: “For some, the home ownership journey is already challenging. First-time buyers, for example, are facing stricter criteria, with some lenders capping financial support from ‘the Bank of Mum and Dad.’ This, in addition to the shrinking range of high loan-to-value products, is leaving many people locked out of the market.”

And Andrew Montlake, managing director at the UK-wide mortgage broker, Coreco, said: “For first-time buyers, sadly, the stamp duty holiday is largely academic as lenders are struggling to provide the mortgage finance. If lenders can improve in this area, that will provide additional support to the market.” (Mortgage Finance Gazette)