A stamp duty reprieve and shifting demands boosted UK house prices more than expected last month to the fastest annual rate in nearly seven years, the Nationwide Building Society revealed.
The UK Nationwide house price index rose 1.8 per cent in May compared with the previous month, bringing the average house price to a record £243,000, up £24,000 over the past 12 months.
The average house price accelerated 10.9 per cent compared with May last year, up from 7.1 per cent in the previous month and the fastest pace since August 2014.
“Records are melting in the white heat of the property market’s boom,” said Jonathan Hopper, chief executive of Garrington Property Finders.
He added that estate agents in desirable rural and coastal areas continue to “be deluged with inquiries and prices are spiking”.
Both readings were much stronger than the 0.8 per cent monthly expansion and the 9.2 per cent annual growth forecast by economists polled by Reuters.
Some of the growth is the result of the housing tax break, introduced in July last year, in an effort to kickstart the housing market after a collapse in home sales during the initial months of the pandemic.
The policy exempts the first £500,000 of any property purchase in England or Northern Ireland from stamp duty land tax, and will be in place until the end of June. A £250,000 tax-free allowance available until the end of September.
However, Robert Gardner, Nationwide’s chief economist, said that the need for more space following increased working also contributed to the surge in house prices.
“It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic,” he said.
Nationwide reports that of those moving or considering a move, around a third were looking to move to a different area, while nearly 30 per cent were doing so to access a garden or outdoor space more easily.
“The majority of people are looking to move to less urban areas,” said Gardner.
He added that the near-term outlook remained “buoyant” for the UK housing market, supported by the government support to jobs and the low borrowing costs.
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