Nationwide tips house price inflation to top 10% as homes hit a high

The average house price surged by nearly £16,000 over the year to April to hit a new record high, according to a major index. 

In April, the typical UK property value hit a peak of £238,831, Nationwide Building Society said, and Britain’s biggest building society predicted that house price inflation will hit double digits by June.

House prices have climbed by more than £1,300 on average per month over the past year, gaining £15,916 or 7.1 per cent on April 2020, as a property boom grips the market, driven by people seeking to move home in lockdown and take advantage of the stamp duty holiday.

On the rise: House prices increased by 7.1% in the year to April, according to Nationwide

On the rise: House prices increased by 7.1% in the year to April, according to Nationwide

House prices jumped by 2.1 per cent month-on-month in April, marking the biggest monthly increase since 2004.

Nationwide predicted that annual house price growth will top 10 per cent by this summer, as buyers continued to take advantage of the Government’s extended stamp duty holiday. 

It said even if house prices remained flat over the next two months – which is not what experts expect – Britain will see double digit property inflation by June.

Robert Gardner, Nationwide’s chief economist, said: ‘Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

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This four-bed semi-detached house in Kingston Upon Thames is listed on Zoopla for £765,000

‘However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place.

‘For example, amongst home owners surveyed at the end of April that were either moving home or considering a move, three-quarters said this would have been the case even if the stamp duty holiday had not been extended.’ 

Low borrowing costs and many people remaining motivated to move as a result of changing housing preferences during the pandemic are also expected to support housing market activity. 

Gardner added: ‘With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.

‘Indeed, if house prices remain flat in month-on-month terms over the next two months, the annual rate of growth will reach double digits in June.

Selling up: The pandemic has led to lifestyle changes which have prompted buyers to move

Selling up: The pandemic has led to lifestyle changes which have prompted buyers to move

‘Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply.’ 

Samuel Tombs, chief UK economist at Pantheon Macroeconomics said that annual house price growth of at least 10 per cent by June ‘looks likely, given the continued strength of demand indicators.

‘For instance, Google Trends data indicate that visits to one of the three main property websites this month have been 29 per cent above their average for the time of the year, a step up from 25 per cent above in March,’ he said. 

‘Similarly, the number of registered house hunters per estate agents’ branch in March was 24 per cent above its average level in the 2010s, a small rise from 23 per cent in February, according to the National Association of Estate Agents.’

However, Tombs said that he expected prices to dip by the end of the year, as the stamp duty threshold returned to £125,000 and households reassessed their spending priorities in the aftermath of the pandemic.  

Others believed the increase in house prices could be sustained after the tax holiday ended.  

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors said: ‘The bounce-back highlighted by the Nationwide figures, which we have also seen on the ground, should be sufficient to ensure there is no price correction when the stamp duty holiday starts to taper off at the end of June.’ 

Currently, home buyers do not pay stamp duty on the portion of a property purchase under £500,000. That threshold will reduce to £250,000 in June and return to the normal level of £125,000 in September.  

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source: dailymail.co.uk