Nationwide: House price growth continues in August

August saw prices increase by 2.1% month-on-month, the second-largest gain in 15 years.

Nationwide: House price growth continues in August
Annual house price growth in August rose to 11.0% from 10.5% in July with the average property now costing £248,857, according to Nationwide's latest house price index. August saw prices increase by 2.1% month-on-month, the second-largest gain in 15 years. Robert Gardner, Nationwide's chief economist, said: “The bounce back 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. "Moreover, the monthly price increase was substantial – at 2.1%, it was the second-largest monthly gain in 15 years (after the 2.3% monthly rise recorded in April this year). “The strength 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 in place until the end of September, though the maximum savings are substantially lower (£2,500 compared to a maximum saving of £15,000 on a property valued at £500,000 before the stamp duty relief in England tapered). “Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books." Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed: "With another month to go until the stamp duty holiday expires, there is still plenty of activity in the housing market. "Property prices are rising due to lack of stock, while cheap borrowing rates give borrowers confidence to go after the property of their dreams in the race for space. "We heard earlier this week from the Bank of England that savings deposits have increased significantly, giving lenders even more ammunition when it comes to offering rock-bottom rates. "As we head into autumn, we expect more of the same for now. With lenders reducing rates across loan-to-values, and not just for those with the biggest deposits, there are opportunities for first-time buyers and home movers alike."

But Gardner warned that despite the current positive market conditions the longer-term outlook is still clouded.

He said: “Underlying demand is likely to remain solid in the near term.

"Consumer confidence has rebounded in recent months while borrowing costs remain low.

"This, combined with the lack of supply on the market, suggests continued support for house prices.

"But, as we look towards the end of the year, the outlook is harder to foresee.

"Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.

“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down.

"But even this is far from assured. 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."