House prices soar by 5.2pc – but this growth can't be sustained, says Halifax

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The average price of a property has soared in value by 5.2pc in the last year, according to Halifax, the building society.

This is the strongest rate of growth since late 2016, with prices up by 1.6pc on the previous month.

It said the average UK house price in August was £245,747, tipping over the £245,000 mark for the first time on record. The average home now costs £12,206 more than it did a year ago.

But with household incomes under pressure and job loss announcements mounting, the report said it is "highly unlikely" that current levels of house price growth will continue.

Russell Galley, of Halifax, said that pent-up demand, combined with a post-lockdown desire for larger homes and the added boost of Chancellor Rishi Sunak’s stamp duty holiday are the key drivers behind the market.

But these factors are all short-term, he said. “It remains highly unlikely that this level of price inflation will be sustained,” said Mr Galley.

For now, the market is protected by the Government measures to support jobs and earnings. When the furlough scheme ends this autumn, “the true scale of the impact of the pandemic on the labour market” will become apparent, said Mr Galley.

When unemployment starts to spike, it could be crunch time for Britain’s property market. “We do expect greater downward pressure on house prices in the medium-term,” said Mr Galley.

There could be a snowball effect. The predicted spike in unemployment will coincide with the end of Britain’s Brexit transition period, due on December 31, which is likely to bring added pressure to the economy.

Next, the stamp duty holiday that has catalysed the market will stop. In July, Mr Sunak raised the nil-rate stamp duty band from £125,000 to £500,000 in England and Northern Ireland until March 31 2021. Scotland and Wales have adopted similar measures. When these tax breaks end, analysts expect transactions to fall.

At the same time, the current Help to Buy scheme will also stop at the end of March. The replacement scheme will operate with a system of regional price caps, which are likely to further constrain the market.

The Government is also due to introduce a new 2 percentage point stamp duty surcharge for foreign buyers in the new tax year that will likely deter overseas purchasers.

Guy Harrington, of lender Glenhawk, said: “The housing market can’t remain immune from the economic downturn indefinitely.”

Even now, the current price growth is not representative of a blanket picture. The market is being driven by wealthy homeowners who had the financial resources to protect themselves from the pandemic. But first-time buyers are increasingly being cut out of the market.

Not only are homes becoming increasingly unaffordable, but lenders have withdrawn low deposit mortgages from the market en masse since the pandemic began. Miles Robinson of online broker Trussle said 92pc of 10pc deposit mortgages have been pulled since March.

Tomer Aboody, of lender MT Finance, said: “If this uptick in market activity is going to continue once the furlough scheme comes to an end in October, the government will need to intervene again and help the market with further stimulus.”

The Halifax figures follow a similar report by building society Nationwide which also reported a record high for house prices in August.