UK house prices soar to record high despite Covid crisis
House prices in the UK jumped to a new record last month, with the average price of a property rising beyond £245,000, according to one of Britain’s largest mortgage lenders.
But Halifax, which is part of Lloyds Banking Group, cautioned that such strong price growth was unlikely to continue as unemployment is expected to keep rising and household earnings have been reduced by the Covid-19 pandemic.
The average price of a home rose 1.6% in August from July to £245,747, said Halifax in its monthly house price report. This is up 5.2% from a year earlier, the fastest annual rate since late 2016.
Russell Galley, managing director at Halifax, said: “A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire among some buyers to move to bigger properties, and of course the temporary cut to stamp duty.”
Estate agents have also reported that buyers are looking for bigger properties after a rise in home working, and coastal and country homes are particularly in demand.
Galley added: “Notwithstanding the various positive factors supporting the market in the short term, it remains highly unlikely that this level of price inflation will be sustained. The macroeconomic picture in the UK should become clearer over the next few months as various government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent.”
The pandemic drove Britain into its deepest recession since records began. Household incomes have suffered as many people have lost their jobs or been furloughed, and economists expect unemployment to rise sharply once the government’s furlough scheme ends on 31 October. As a result, Galley said: “We do expect greater downward pressure on house prices in the medium term.”
The EY Item Club, a leading economic forecaster, estimates house prices could fall by 3% by early 2021. Howard Archer, its chief economic adviser, said the group “does expect housing market activity to gradually improve from early 2021 as the labour market stabilises then starts to modestly improve and the UK’s economic recovery continues”.
The Halifax figures come after Nationwide building society also reported a record high in August, with house prices up 2% to £224,123 on its index.
Other surveys have also shown a pick-up in the housing market since it reopened in May, with prices boosted by pent-up demand and Rishi Sunak’s stamp duty holiday for properties up to £500,000 in England and Northern Ireland.
Mark Harris, the chief executive of mortgage broker SPF Private Clients, said: “The demand for mortgages continues to be strong as borrowers take advantage of some competitively priced deals, particularly those with big deposits to put down. For first-time buyers, the situation is trickier with less choice of high loan-to-value products.”
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