The average UK house price headed towards the £250,000 ($343,984) mark in August, even as the stamp duty holiday ended and the rush to market caused by people moving amid coronavirus lockdowns cooled.
According to Nationwide's monthly House Price Index (HPI) annual house price growth increased to 11% in August, from 10.5% in July.
Prices rose 2.1% in month-on-month terms, after taking account of seasonal effects. House prices are now around 13% higher than when the pandemic began.
“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," said Robert Gardner, Nationwide's chief economist.
"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)."
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Gardner said that the growth 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," he said.
Nationwide said that 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.
The new data comes a day after the Bank of England's latest mortgage approval figures showed that UK mortgage approvals had fallen 6.4% in July, down to 75,200 from 80,300 in June.
Approvals for house purchases, an indicator of future borrowing, hit the the lowest levels since July 2020, but remained above pre-February 2020 levels. Economists had expected approvals of around 79,000 for July.
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