House prices have reached a new all-time high, according to the Nationwide Building Society, which reported a 2% monthly increase in August, the largest since February 2004. The average price now stands at £224,123, reversing losses recorded in May and June.
The recovery in housing market activity has been described as 'unexpectedly rapid' by Nationwide, driven by pent-up demand from lockdown, behavioural shifts as people reassess their housing needs, and the temporary stamp duty holiday in England and Northern Ireland. Annual house price growth accelerated to 3.7%, up from 1.5% in July.
However, forecasters predict a drop in prices as the economic impact of the pandemic on jobs becomes more apparent. The Office for Budget Responsibility has forecast price falls, particularly next year, while the Resolution Foundation warns of potential negative equity for some homeowners.
First-time buyers may face challenges, as lenders tighten criteria and require larger deposits. Lucy Pendleton of James Pendleton estate agents noted a 'barnstorming recovery', but Andrew Montlake of Coreco cautioned that 'as strong as the property market is right now, it will not last', citing rising unemployment and the end of the furlough scheme.
Nationwide's chief economist Robert Gardner stated that 'most forecasters expect labour market conditions to weaken significantly in the quarters ahead', which would likely dampen housing activity once again.
