Research from mortgage lender Nationwide and HM Land Registry both indicate rising values, albeit that the figures reflect different periods. However, they do corroborate and support the fact that the property market has seen unprecedented levels of growth over the summer, despite the current economic headwinds.
Based on data collected post mortgage valuation stage, figures released by the Nationwide this morning show a month on month increase of two percent in August, as annual growth rose by 3.7 percent, with the UK average house price rising to £224,123.
Robert Gardner, Nationwide’s Chief Economist observes: “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.
“This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.
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“Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
“Our own research conducted in May indicated that around 15 percent of people surveyed were considering moving as a result of lockdown.
“Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this point.”
Mr Gardner adds: “These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward.
“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down.
“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
Agreeing with Mr Gardner’s caution is Guy Harrington, CEO of residential lender Glenhawk.
Viewing the speed of the market’s recovery as “almost jaw dropping”, Guy is also circumspect about the sustainability of current market conditions and says: “The government money train cannot go on forever, however.
“The end of furlough, which will be the trigger for a winter of pain for millions, is imminent, and that’s before we even factor in a second spike. The market looks dangerously close to bubble territory; it’s a matter of if, not when, it bursts.”
That aside, a second set of data released today highlights consumer confidence in bricks and mortar remaining consistent throughout the lockdown period.
Latest figures from HM Land Registry point to a year on year increase in May of 2.9 percent.
These make for compelling reading, given that these numbers represent residential transactions which were completed and registered during the month, many of which probably took place after mid-May when many estate agents, surveyors and solicitors were able to return to work.
Jeremy Leaf, former RICS residential chairman, explains: “This index always commands attention, not least because it provides the most comprehensive snapshot of the UK property market, albeit a little historic.
“Nevertheless, the figures underline the resilience of the property market and a determination of buyers to complete transactions at previously agreed prices from before lockdown, bearing in mind the inevitable lag between the time the sale is agreed and completion.”
Mr Leaf continues: “We are seeing that same determination now as buyers continue to press on with moves irrespective of the potential economic storm clouds gathering, encouraged by the stamp duty holiday and low interest rates.
“If anything, momentum is being restrained by lack of lender capacity to deal with the recent upsurge in interest.”
Tomer Aboody, director of property lender MT Finance comments: “Back in May, where transactions reflected deals made before lockdown took hold, the housing market was on an upwards trajectory with transactional volumes increasing.
“These figures prove that buyers were definitely there, waiting in the wings to purchase. Values were increasing year-on-year due to lack of supply, with buyers having to pay more to secure a property.”
As the pressure on solicitors, mortgage brokers and surveyors increases, due to processing the rising numbers of transactions, many in the industry believe that aside from the current economic uncertainty, there is another challenge waiting in the wings.
They argue that unless the current stamp duty holiday is extended beyond March, there’s the danger of a ‘cliff edge’ property market next spring. A similar scenario occurred in March 2016, when stamp duty was increased as of April for those purchasing second homes or investment properties.
This contributed to a fall in transaction numbers for the rest of 2016, as many landlords and second home buyers had rushed deals through in order to complete before the end of March deadline.
Could April 2021 be any different? Only time – and any further intervention from Mr Sunak – will tell.
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