House prices rose 13.4% on an annual basis in June, shows the latest Nationwide house price index, which is the most rapid growth witnessed since November 2004.
Month-on-month, Nationwide calculates house price growth of 0.7%, bringing the average price for a home in the UK to £245,432.
This compares to annual house price growth of 10.9% in May, or 1.7% monthly growth.
Nationwide chief economist Robert Gardner points out that, “all parts of the UK saw an acceleration in annual house price growth,” adding that, “Northern Ireland and Wales saw the largest gains, at 14% and 13.4% respectively in Q2.
Gardner is confident that in the short term, low borrowing costs and a constraint supply will keep prices rising. He adds, however: “As we look toward 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 strong incentive for people to bring forward their purchases to avoid the additional tax.
“Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down.
“But even this is far from assured,” he says, explaining that even jobs are lost en masse, “there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”
Yopa chief analyst Mike Scott says that this recent house price growth, “cannot just be due to the stamp duty holiday, since prices are still growing (albeit more slowly) in Scotland where the holiday ended in March.”
He adds: “Furthermore, even in the rest of the country the prices in this report are based on mortgage approvals in June, which are unlikely to have led to a completed purchase before the 30 June deadline for the main part of the stamp duty holiday.
“While there will undoubtedly be a slowdown in the rate of activity after tomorrow’s stamp duty deadline, we don’t expect this to lead to any price falls. Prices are likely to keep rising for at least the remainder of 2021 as supply is still very limited and people are looking to move on with their lives after the pandemic, which for many will mean moving house.”
Glenhawk chief executive Guy Harrington says, however: “This is only going to end one way. Given the economic backdrop and with government support schemes ending in a few months, this insane level of growth is long overdue a correction.
“In some rural hotspots houses are selling for 40% over the asking price. The UK housing market has a rocket attached that is burning low on fuel and once this perfect storm passes, we are headed for a serious shock to the system.”
