UK house price warning: Expert warns buyers should not be fooled by 'false dawn'

The latest survey by the Nationwide building society showed house prices increased by 1.7 percent last month – the biggest increase the firm has recorded since August 2009. The average price of a home has also risen 1.5 percent from a year ago to now stand at £220,936. July’s house price rise is a major boost for the struggling market, after values fell 1.6 percent in June and 0.1 percent year-on-year.

Robert Gardner, chief economist at Nationwide, said pent-up demand was likely coming through in July as coronavirus lockdown measures eased throughout the country.

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

But Mr Gardner warned the coronavirus pandemic itself might also be affecting people’s behaviour.

In May, a survey from Nationwide revealed 15 percent of people were considering moving house because of their new locked down lives.

However, the chief economist warned homeowners not to assume the market has recovered just because of one good set of results.

He said: “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.”

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“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.”

Hansen Lu, property economist at Capital Economics, also warned: “House prices bounced back in July, unwinding the fall seen in June.

“Along with the pickup in lending in June, this reinforces our view that a house price crash is now unlikely.

“Although, with the mortgage holiday and furlough schemes due to end soon, further modest price falls may still be on the horizon.”

Housing experts have also said the Government’s decision to cut stamp duty on all purchases over £500,000 will also prop up house prices in the near future.

But Howard Archer, chief economic adviser to the EY Item Club, warned “the upside for the housing market will be limited due to challenging fundamentals for consumers”.

He said: “Many people have already lost their jobs, despite the supportive government measures, while others will be concerned that they may very well still end up losing their job once the furlough scheme ends.”


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