Nationwide: Housing market remains robust as annual house price growth hits five-year high

Property Reporter
30th October 2020
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The latest market analysis from Nationwide has confirmed that the housing market recovery continues into autumn, with this morning's figures revealing that annual house price growth rises to 5.8% in October, the highest rate since Jan 2015.

After taking account of seasonal factors, the society says that house prices were up 0.8% month-on-month during October, following a 0.9% rise in September.

Robert Gardner, Nationwide's Chief Economist, comments:

“Data suggests that the economic recovery has lost momentum in recent months with economic growth slowing sharply to 2.1% in August, down from 6.4% in July, despite a strong boost to the hospitality sector from the Eat Out to Help Out scheme, which has since expired.

“Labour market conditions also weakened with the unemployment rate rising to 4.5% in the three months to August – still low by historic standards, but up from an average of 3.8% in 2019.

“Nevertheless, housing market activity has remained robust. Mortgage approvals for house purchase climbed to 91,500 in September – the highest level since 2007.

“The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy. Behavioural shifts as a result of Covid-19 may provide support for housing market activity, while the stamp duty holiday will continue to provide a near term boost by bringing purchases forward.

“However, activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March."

Anna Clare Harper, CEO of asset manager SPI Capital and author of Strategic Property Investing, says:

"House price growth of 5.8 per cent in the year to October reflects positive forces that are applying uniquely to the housing market. Prices are being buoyed up by the temporary stamp duty reduction, the release of pent-up demand and supply, and the desire to improve surroundings following lockdown.

"House price growth also reflects uncertainty and lack of alternatives. If you are getting low or no returns with other investments, you are more likely to choose the tangibility and security that comes with putting money into bricks and mortar.

"There are some concerns that we are moving into bubble territory, with homeowners and investors encouraged by low interest rates. No surprise that mortgage approvals hit the highest level (91,500) since 2007. The good news is, interest rates are low and are likely to remain so.

"There is more good news in the qualitative data: many more people are prioritising minimising their carbon footprint in their property decisions, including focusing on enhancing their homes to minimise their carbon footprint and maximise energy efficiency. This is vital and helpful for meeting the UK Government’s 2050 emissions targets."

Jamie Johnson, CEO, FJP Investment, adds:

"Today’s figures from Nationwide demonstrate that 2020’s UK property boom is still very much happening. Buyer demand that accrued during lockdown is still being released back into the market - stimulating transactions and property price growth as a result.

“However, with a new rise of UK COVID-19 cases and talk of an ensuing second lockdown, the positive growth we have been seeing could suddenly grind to a halt this winter.

“To avoid this requires forward planning and the implementation of new measures to support buyer demand for residential real estate. One such measure could simply be extending the SDLT holiday past its current March 31st deadline.

“A recent FJP survey showed that 43% of 18-34 were keen on taking advantage of the SDLT holiday, so the demand definitely exists. However, given the delays currently faced by individuals when securing financing, some have had to wait until conditions are right to pursue transactions. An extension of the SDLT holiday, I believe, would be heartily welcomed by all."

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