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Average house prices last month increased at their fastest annual pace for seven years, hitting 10.9% and pushing the average price of a house in Britain to a record high of £242,832, up nearly £24,000 over the past 12 months.
House prices rose on average by 1.8% in May, following a 2.3% rise in April, according to figures from mortgage lender Nationwide. The annual rate of increase rose from 7.1% a month earlier.
The price rises are being driven by a “race for space”, as buyers search for bigger homes and gardens , according to Nationwide’s research. Almost a third (30%) of buyers are planning to move so they can access a garden or outdoor space more easily, while a similar figure wanted to buy a larger property.
More than 20% of buyers who have moved or want to move said they wanted to “get away from the hustle and bustle of urban life.” Even many young buyers are seeing the attractions of the countryside. While a quarter of 18- to 24-year-olds were still seeking homes in large cities and towns, an equal proportion were keen on heading out to rural locations.
Record low interest rates and the stamp duty holiday (which will fall from £500,000 to £250,000 at the end of June, and finish three months later) are all boosting the market and making it even harder for first-time buyers to get onto the housing ladder.
The temporary stamp duty holiday, which was extended by three months to the end of June in the chancellor’s March budget, has brought some house purchases forward, according to Nationwide, although it is not the main driver of transactions.
“While March’s spike in transactions was driven by the original end date of the stamp duty holiday, a lot of momentum has been maintained,” said Robert Gardner, the chief economist at Nationwide.
“Our research indicates that the extension to the stamp duty holiday is not the key factor, though it is clearly impacting the timing of transactions.”
The housing market boom marks a complete turnaround from last May, when property viewings were allowed to resume following the first nationwide lockdown.
The number of housing transactions sank to a record low of 42,000 in April 2020, but the surge in activity pushed them to a record high of 183,000 in March 2021.
Nationwide said it expected the housing market to remain “buoyant” over the next six months, but cautioned that the longer term outlook is more uncertain.
“If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained,” Gardner said.
The rise in house prices is being watched carefully by the Bank of England, as it monitors whether the UK’s economic recovery from the pandemic could lead to a sustained period of inflation.
The Bank’s deputy governor Sir Dave Ramsden said in an interview with the Guardian that the central bank only expected price pressures to be temporary, but said he and the fellow members of the Bank’s monetary policy committee were aware of the risks of inflation.
Source: The Guardian
Keyword: ‘Race for space’ fuels surge in UK property prices | House prices