In stark contrast to the steep declines brought about by the COVID-19 lockdown, house prices have once again skyrocketed to a new record high. According to the latest figures from Nationwide, average house prices for August rose at their fastest monthly rate in more than 16 years.
Despite having experienced heavy losses in May and June, property prices spiked a full 2% in August. This took the average asking price for a home to a new high of £224,123, reported Nationwide Bank chief economist Robert Gardner.
Many economists believe, however, that the knock-on effects of the coronavirus crisis, particularly in relation to employment, may result in a steady slowdown of recent property price hikes.
An unexpectedly rapid spike
Nationwide admitted that while the release of pent-up demand among buyers was predicted to result in property price increases, the sheer speed of the market’s recovery had been “unexpected.”
The latest figures from the lender indicate that average house price growth for August has outpaced every month since February 2004. Year-on-year, average property prices were found to be up an impressive 3.7% compared to the same time last year.
A recent report from Halifax mirrored the findings of Nationwide, suggesting all-time record-high property prices during the summer.
All change in 2022?
Speaking on behalf of Nationwide, chief economist Robert Gardner stated that while the trend is likely to continue for a while, it’s unlikely the market’s huge growth will maintain its current pace long-term.
“This rebound reflects a number of factors. Pent-up demand is coming through, where decisions taken to move before lockdown are progressing,” commented Mr. Gardner.
“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward.”
“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the after-effects of the pandemic and as government support schemes wind down.”
“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
Likewise, the Office for Budget Responsibility, the official forecaster for the government, has also predicted a decline in average house prices next year.
Interviewed by the BBC, a London-based mortgage broker also predicted that, irrespective of the market’s current buoyancy, the situation as it looks today will be temporary at best.
“Two words: a reality check. As strong as the property market is right now, it will not last,” he told the BBC.
“Demand is understandably strong after lockdown and the added bonus of the stamp duty holiday, but unemployment is rising by the day and the economic outlook is highly uncertain as the furlough scheme ends.”
“In the final months of the year, we will start to see a reversal in the current rate of house price growth.”