Nationwide: House prices see the biggest monthly rise in 17 years

Property Reporter
30th April 2021
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The boom keeps on resonating. The stamp duty extension has caused a reacceleration of house price growth during April, rising sharply from 5.7% in March to 7.1% - the biggest monthly rise in house prices since February 2004, according to this morning's report from Nationwide.

Nationwide's figures also revealed that a new record high average house price of £238,831 was hit during the month, up £15,916 over the past 12 months.

Robert Gardner, Nationwide's Chief Economist, said: “Annual house price growth accelerated to 7.1% in April, only slightly below the peak of 7.3% recorded in December and up from 5.7% in March. In month-on-month terms, house prices rose by 2.1% in April, after taking account of seasonal effects, the biggest monthly rise since February 2004.

“Just as expectations of the end of the stamp duty holiday led to a slowdown in house price growth in March, so the extension of the stamp duty holiday in the Budget prompted a reacceleration in April.

“However, our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place. For example, amongst homeowners surveyed at the end of April 1 that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended.

"Near term outlook buoyant, but uncertain further out “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 and with many people still motivated to move as a result of changing housing preferences in the wake of the pandemic.

“With the stock of homes on the market relatively 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. Indeed, if house prices remain flat in month-on-month terms over the next two months, the annual rate of growth will reach double digits in June.

“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.

“There has been a surge in household deposits since the pandemic struck in early 2020, in large part as people were unable to go out and spend on the things they would normally purchase. In the 12 months to February 2021, household deposits increased by £196 billion, equivalent to around £7,000 per household, and almost three times the amount accumulated in the same period the previous year.

“Given that raising a deposit is the main challenge for most prospective first time buyers, where a 10% deposit on the typical first-time buyer home is c£19,500, or around 50% of gross earnings, this might suggest that the recent rise in savings balances will help more first time buyers to enter the housing market.

“However, the increase in savings has been concentrated amongst older, wealthier households. The fact that around a third of first-time buyers in England in 2018/19 said that friends or family helped them to raise a deposit through a loan or gift suggests that the recent surge in savings will help some, but that the impact won’t be spread evenly.”

Anna Clare Harper, chief executive of asset manager SPI Capital, says: "According to Nationwide, house prices rose by 7.1% in the year to April, up from 5.7% in March. The slowdown in March reflected the planned end to the temporary reduction in stamp duty, and April’s rebound reflects its announced extension.

"Beyond transaction tax, there are other important drivers of the buoyant housing market, in an otherwise challenging economic environment. Firstly, in a context of long-term increases in living standards, many people wanted and needed to move house, encouraged to improve their surroundings by repeated lockdowns. Secondly, it is cheap to borrow, due to very low-interest rates, which give buyers a ‘discount’. And third, there is a ‘flight to safety’: in times of uncertainty, people want to put their money in a stable asset with low volatility.

"Looking to the future, these drivers are likely to hold up throughout 2021. The good news for property investors and homeowners is that property tends to hold its value well through times of uncertainty because demand stays strong and new supply is limited. Ultimately, we all need a roof over our heads. That said, while stamp duty has been the main talking point driving house prices and transactions over the past year, the next trend investors and homeowners need to know is quite different. In the context of our commitment to net zero, environmental efficiency will be a key driver of house prices and values going forward."

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