According to the Nationwide House Price Index[i], the price of the average UK house soared by 13.4% year-on-year in June (chart of the month), the largest increase witnessed in over 17 years – since November 2004. Obviously, there is a strong base-effect distorting this reading because in June last year prices had collapsed in the aftermath of the first lockdown. There is also the stamp-duty factor contributing to the strength of the housing market due to many buyers rushing to complete on their deals before the end of the stamp-duty holiday on 30 June, a measure that translated into a £15,000 saving for those purchasing homes above the £500,000 threshold[ii]. However, despite those mentioned factors, the market has continued to show significant momentum over the past few months and an increasing number of buyers are reportedly paying over the asking price[iii]. The average UK house price has now soared by almost £30,000 over the past twelve months and by nearly £15,000 in the year-to-date.
Chart of the month: Monthly UK house price, annual % change
Source: Nationwide House Price Index, Blend Network
- Looking at the monthly trends, June saw the third consecutive month-on-month rise (0.7%), after taking account of seasonal effects[iv]. Prices in June were almost 5% higher than in March. That being said, the month-on-month growth has clearly started to ease over the past few months (2.3% in April, 1.8% in May and 0.7% in June).
- According to the Nationwide House Price Index[v], average UK house prices rose by 10.3% year-on-year in Q2, but the reading also shows a wide divergence between different regions. Northern Ireland, by far the best-performing region, saw average house prices increase by 14% year-on-year, while on the other end of the spectrum Scotland saw average house prices increase by 7.1% year-on-year. Figure 1 shows the relative performance of some UK regions since 2015, whereas we can see, Northern Ireland has seen a very strong performance, closely followed by the West Midlands.
- In its latest affordability estimates[vi], the data published by Nationwide suggests that despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows. However, according to Nationwide house prices are close to a record high relative to average incomes. This is important because it makes it even harder for prospective first time buyers to raise deposits.
Figure 1: UK regional house price (index Q1 2015=100)
Source: Nationwide House Price Index, HMRC, Blend Network
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[i] Source: www.nationwide.co.uk/about/house-price-index/headlines#tab:Headlines
[ii] Source: www.standard.co.uk/homesandproperty/property-news/stamp-duty-holiday-ends-london-asking-prices-higher-than-before-tax-break-b943343.html
[iii] Source: www.estateagenttoday.co.uk/breaking-news/2021/6/ever-more-buyers-paying-over-the-asking-price-for-properties
[iv] Source: www.nationwide.co.uk/-/media/MainSite/documents/about/house-price-index/2021/Jun_Q2_2021.pdf
[v] Source: www.nationwide.co.uk/about/house-price-index/headlines#tab:Headlines
[vi] Source: www.nationwide.co.uk/about/house-price-index/download-data#xtab:affordability-benchmarks