UK house prices jump unexpectedly in August
Nationwide reports increase of just over 2% last month compared with average prices in July
The UK’s house price growth unexpectedly accelerated in August despite the gradual phasing out of the government’s stamp duty holiday, following the second largest month-on-month increase in 15 years.
Year-on-year house price growth in August climbed to 11%, according to Nationwide, up from 10.5% in July and nudging the UK’s average amount paid for a property closer to the £250,000 mark.
The building society’s house price index showed an increase of just over 2% last month compared with average prices in July, the second largest house price increase since 2016 after the 2.3% monthly rise recorded in April this year.
House prices are now about 13% higher than when the coronavirus pandemic began, with the average home costing £248,857, up from £244,229 last year.
Last month’s house price increase follows a short-lived contraction in July when house sales tumbled by two-thirds after the government scaled back tax breaks for new buyers. Nationwide said price growth had shrunk by -0.6% before the August rebound.
Robert Gardner, Nationwide’s chief economist, said: “The bounceback in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market.”
He said the surprise increase may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief before it finishes at the end of September in England and Northern Ireland, combined with a low number of properties on estate agent books. The stamp duty holiday has already ended in Wales and Scotland.
Nationwide expects the trend in rising property prices to continue in the short-term because of a rebound in consumer confidence alongside a tight supply of properties. However, the outlook for the property market by the end of the year is “still clouded”.
Activity in the property market will “almost inevitably” slow down when the stamp duty holiday winds down at the end of the month, and property demand could stall if the end of the year brings a rise in unemployment as government support schemes come to an end.
“But even this is far from assured,” Gardner said. “The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”