Nationwide has warned that the 1.7% leap in house prices last month could be a ‘false dawn’.
The UK’s largest building society said that the jump in sales had been caused by those who had planned to move before the lockdown was enforced, and those who had decided that they wanted to move after being stuck in their home for many weeks.
However, if unemployment continues to increase, there could be a slow down in the market further down the line.
It has been a busy couple of weeks for the property market since the lockdown restrictions were lifted and the government announced the waiving of stamp duty on homes worth up to £500,000.
Figures from Nationwide show the average UK home to be priced at £220,936. This is below the average for April, but higher than June. Adjusted for the time of year, house prices have tumbled by 1.6% in the last three months.
Nationwide’s chief economist, Robert Gardner, said: “The rebound in activity reflects a number of factors. Pent-up demand is coming through, where decisions taken to move before lockdown are progressing.
“Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.”
Gardner expects that in the short term the trends will continue, especially as the stamp duty holiday has given people a reason to purchase homes sooner than later. However, he warned that ‘there is a risk this proves to be something of a false dawn’.
“Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the after-effects 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,” Gardner said.
Head of residential research at Savills, Lucian Cook, said: “The market is currently being driven by those with the security in their household finances to be able to act on the lifestyle changes and desire for more space that the experience of the lockdown has brought about.”
Property economist at Capital Economics, Hansen Lu, said: “Looking ahead, the outlook for house prices is uncertain. With the furlough and mortgage holiday schemes due to end later this year, the housing market is unlikely to strengthen much further in the near-term.
“We may still see renewed price falls this year, as the early wave of pent-up housing demand cools off and unemployment creeps up further. At the same time, today’s data also reinforces our view that a house price crash is now unlikely.”
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