House prices bounced back unexpectedly in August, according to figures released by mortgage lender Nationwide.
The Swindon-headquartered building society said British house prices rose by 2.1 percent month on month in August, following a 0.6 percent fall in July when the year-long stamp duty exemption for the first £500,000 ended.
That means the average house cost over £4,500 more in August than it did in July – up from £244,229 to £248,857.
House prices are now around 13 percent higher than when the pandemic began.
“The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market," said Nationwide's chief economist Robert Gardner.
"Moreover, the monthly price increase was substantial – at 2.1 percent, it was the second-largest monthly gain in 15 years (after the 2.3 percent monthly rise recorded in April this year."
"The strength may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, though the maximum savings are substantially lower," he said.
“Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books.
Robert said underlying demand is likely to remain solid in the near term.
"Consumer confidence has rebounded in recent months while borrowing costs remain low.
"This, combined with the lack of supply on the market, suggests continued support for house prices.
"But, as we look towards the end of the year, the outlook is harder to foresee.
"Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down.
"But even this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet."