The pandemic has rocked the housing market, with demand returning after the UK-wide lockdown and temporary stamp duty cuts, helping to support sales even as economists forecast a significant increase in unemployment in the next quarter.Prices rose 0.9% per month in September after jumping 2% the previous month as housing market activity surged, Nationwide said. Separate data released by the Bank of England on Tuesday showed mortgage approvals in August to hit their highest level in nearly 13 years and rival mortgage lender Halifax also reported record prices in the UK in August .
Price jumps were evident across the UK, with the south-west of England and the suburban towns surrounding London recording increases of more than 5% in the third quarter of 2020 compared to a year earlier. It was only in Scotland and the North West of England that the pace of annual growth slowed during the quarter.
Average prices in London hit a record high of £ 480,857 in September, leaving them 57% above their 2007 levels, shortly before the global financial crisis.
Robert Gardner, Nationwide Chief Economist, said: “The rebound [in UK prices] reflects a number of factors. Pent-up demand is making itself felt, with decisions made to relocate before the ongoing foreclosure.
“The stamp duty holiday adds to the momentum by moving purchasing forward. Behavior changes can also stimulate activity as people reassess their housing needs and preferences due to life in lockdown. ”
However, some economists predict that the surge in house prices could run out of steam in the coming months, with government support for the labor market declining significantly, and unemployment is expected to hit 8% by the end of the year, according to independent forecasts. collated by the Treasury.
The stamp duty holiday for properties under £ 500,000 will also expire on March 31, 2021, unless Chancellor Rishi Sunak chooses to extend it in a delayed budget.
An economic forecaster, the EY Item Club, suggests house prices could be around 5% lower than they are now by mid-2021, as the economy deteriorates.
Hansen Lu, economist at Capital Economics, a consultancy firm, said: “Price gains are likely to slow as the pent-up demand, which is currently fueling the market, is exhausted. Looking ahead, we believe that a weak underlying economy and the end of the stamp duty cut will slow house price growth to a halt by the end of 2021. ”
The “mini boom” in housing prices may in part reflect the shift to working from home during the pandemic, Lu added: Residential homebuyers looking for more space are effectively paying for floor space that was previously paid by their employers.