Property market 'looks dangerously close to bubble territory' claims bridging lender after house price surge

UK annual house price growth has accelerated to 3.7% in August, according to the latest Nationwide House Price Index.

Prices grew by 2% month-on-month after taking account of seasonal factors, up from 1.8% in July.

The report confirmed that this is the highest monthly rise since February 2004, when it stood at 2.7%. 

“House prices have now reversed the losses recorded in May and June and are at a new all-time high,” said Robert Gardner, Nationwide's chief economist.

“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.” 

Robert believes the rebound reflects a number of factors, including pent-up demand where decisions taken to move before lockdown are progressing, and behavioural shifts as people reassess their housing needs and preferences as a result of life in lockdown. 

Nationwide’s research in May indicated that around 15% of people surveyed were considering moving as a result of lockdown. 

“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward. 

“However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. 

“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”

The property market responds

Guy Harrington, CEO at Glenhawk, commented: “The speed of the market’s recovery is almost jaw dropping, with the recent stamp duty holiday and whimsical consumer behaviour seemingly turbo charging a market that looks increasingly disconnected from economic reality. 

“The government money train cannot go on forever, however. 

“The end of furlough, which will be the trigger for [a] winter of pain for millions is imminent, and that’s before we even factor in a second spike. 

“The market looks dangerously close to bubble territory; it’s a matter of if, not when, it bursts.” 

Joshua Elash, director at MT Finance, added: “The results reflect both pent-up demand driving higher prices, but also the unprecedented level of liquidity which has been pumped into the economy by the government over the past few months. 

“While the news is positive, we would warn against over-optimism. 

“The long-term impact of the Covid-19 pandemic and resulting lockdown will not begin to be borne out in these figures until the furlough scheme has truly ended. 

“Only then will we have visibility on the resulting unemployment numbers and the impact this will have on the nation’s finances and indeed the property market.”

“A stunning proportion of properties are now going for asking price or more, and offers are flooding in; It’s like lockdown was a bad dream,” stated Lucy Pendleton, property expert at James Pendleton.

“The number of buyer registrations is also holding up at a time of the year that would typically see a slowdown.

“We’re dazzled and delighted by the speed of the recovery — this is less a case of green shoots, more Britain in bloom. 

“A record high for prices tells you all you need to know about the confidence of buyers at the moment. 

“The end of the furlough scheme is still two months away but that remains the biggest threat to the UK’s economic recovery and the strength of the property market. 

“A softer landing than hoped for the labour market in November and December could mean this bullish streak still has a long way to run.”

Mark Harris, chief executive at SPF Private Clients, said: “This year, many people didn’t get to go on their summer holidays — for obvious reasons — [and] stayed home and bought property instead. 

“We expect September to continue to be busy while consumer demand remains strong, although as the furlough scheme comes to an end and there is an increased potential for higher unemployment, there may be a question mark over how sustainable this activity will be.”

Sam Mitchell, CEO at online estate agent Strike, highlighted: “On top of house prices making their comeback, sellers are receiving multiple offers and the time it takes to sell is dropping substantially. 

“We’ve seen at least a 50% increase in demand from buyers now versus before lockdown, and on average we’re agreeing twice as many sales per week. 

“Looking ahead, we’re expecting it to get even busier between now and the end of the year, with people rushing to agree offers pre-Christmas to exchange and complete in time for the stamp duty discount deadline in March. 

“Come the new year, there are a lot of factors that may play a role — Brexit and the wider economy being the largest — and things may change. 

“But for the moment, it’s safe to say I’ve never seen a market like it.


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