Shifting housing preferences are ‘continuing to drive activity’
UK house prices rose by an annual 10.9%, the biggest jump in nearly seven years.
The rate could increase more rapidly as people seek new homes in the aftermath of the pandemic, according to Nationwide.
Nearly 70% of homeowners weighing up a move said they would go ahead even without the extension of tax incentives from the UK government. This is according to a survey organised by Nationwide at the end of April.
Shifting housing preferences were “continuing to drive activity, with people reassessing their needs in the wake of the pandemic,” Nationwide’s chief economist Robert Gardner said.
The numbers released on Tuesday by Nationwide are the most recent showing the extent of the rise in house prices, as they hit a record high at an average of £242,832.
A risk remains that demand surpasses supply, which could create a risk of inflationary pressure said Bank of England Deputy Governor Dave Ramsden.
“We are looking carefully at the housing market and a raft of real-term indicators,” Ramsden told the Guardian.
Nationwide said that the average house price was 1.8% higher in May than the month before.
According to a Reuters poll of economists, prices were expected to increase by 9.2% in yearly terms and by 0.8% from April.
Following the first lockdown, housing transactions collapsed to a record low of 42,000 in April 2020.
By March 2021, activity reached a record high of 183,000 as activity soared at the backend of 2020 and into the new year.
There has been a complete turnaround in price since the pandemic began according to Nationwide’s chief economist Robert Gardener.
“Amongst homeowners surveyed at the end of April that were either moving home or considering a move, more than two thirds said this would have been the case even if the stamp duty holiday had not been extended,” Gardner said.
“It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic.”
Sam Mitchell, CEO of online estate agent Strike, said: “Contrary to the British weather, the UK property market was red-hot in May and house prices showed no signs of cooling.
“The fast approaching stamp duty holiday deadline has helped turn the market into a frenzy, but there are other factors at play here. A sense of normality is returning as restrictions lift and the vaccination roll out progresses, while we’ve also seen a major uplift in the 95% mortgage offering which has helped more first-time buyers come to the market.
“Many will be questioning if this level of demand will last once the stamp duty holiday begins to taper off, but let’s not forget that the UK is still faced with a major supply and demand imbalance issue. A lack of new stock, particularly houses with outside space and in rural locations, will continue to push prices up by being outweighed by demand. Plus, the Government may well have something else up its sleeve to support the market once the stamp duty holiday ends.”