House prices reach new record in the ‘race for space’
This was the highest yearly growth in seven years. Over the past 12 months, house prices have risen by £23,930.
Compared to April, this was a monthly increase of 1.8% down from the 2.3% growth seen that month which marked the biggest rise since 2004.
Robert Gardner, Nationwide’s chief economist, said the extension of the stamp duty holiday had impacted the timing of purchase activity but research conducted by the mutual found it was not the key driver.
Its survey of 3,000 people at the end of April discovered 68% of those who were either moving home or considering a move would have done so even if the stamp duty holiday had not been extended.
A quarter were moving or considering a move due to the pandemic, citing reasons such as more space or relocating from urban areas.
Gardner said: “Housing market activity is likely to remain fairly buoyant over the next six months as a result of the stamp duty extension and additional support for the labour market included in the Budget, especially given continued low borrowing costs, improving credit availability and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic, as highlighted above.
“With the stock of homes on the market constrained, there is scope for annual house price growth to accelerate further in the coming months, especially given the low base for comparison in early summer last year.”
Gardner added: “Further ahead, the outlook for the market is far 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.”
Hostile environment for FTBs
Nationwide’s figures for May also showed the UK house price to earnings ratio had risen from 6 last year to around 6.4 this year.
Tracy Crookes, financial planner at Quilter, said: “It really is a seller’s market at the moment, and with house prices at their highest level in nearly seven years it is a hostile environment for first-time buyers who would have struggled to afford to buy even before the pandemic.
“With prices now 10% higher, the dream of home ownership is even further out of reach. Indeed, Nationwide has reported a marked uptick in the house price to earnings ratio, a key measure of affordability.”