UK house prices have now reversed the losses recorded in May and June and are at a new all-time high. Indeed, data from the Nationwide House Price Index shows that following the strong rebound in UK house price growth in July, prices reached a record high in August. Annual house price growth picked up to 3.7% in August and prices were up by 2% month-on-month. The price rebound reflects the surprisingly rapid recovery in housing market activity since the easing of lockdown restrictions, which we believe is only partly due to the stamp duty holiday. We believe a number of other factors have contributed to this rapid recovery, namely buyers trying to secure mortgages before they expect to see job losses later this year and pent up demand where decisions taken to move before lockdown are progressing.
Chart of the month: Monthly UK house price, annual % change
Source: Nationwide House Price Index
Market Commentary
- Following a short-lived blip in June, annual house price growth picked up to 3.7% in August, the same level as in April and the strongest growth since February 2017 (4.5%). This is shown in our chart of the month where this V-shaped blip is illustrated.
- Looking at monthly price activity, prices were up by 2% in August compared to July following a 1.8% rise in July. This is the highest monthly rise since February 2004 (2.7%). As a result, UK house prices are up by 2.2% year-to-date during the first 8 months of the year compared to the same period last year.
- This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown. Interestingly, research by Nationwide conducted in May (link) indicated that around 15% of people surveyed were considering moving as a result of lockdown. According to the latest Bank of England Monetary Policy Report, high-frequency indicators suggest that UK spending has recovered significantly since the trough in activity in April and GDP will continue to recover beyond the near term.
Figure 1: UK house price change and GDP growth
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