A stamp duty reprieve and shifting demands pushed UK house prices up more than expected last month at the fastest annual rate in nearly seven years, the Nationwide Building Society has revealed.
The UK’s National House Price Index rose 1.8 percent in May from the previous month, taking the average house price to a record £ 243,000, up £ 24,000 over the course of of the last 12 months.
The average house price accelerated 10.9% from May last year, down from 7.1% the previous month and the fastest pace since August 2014.
“Records are melting in the white heat of the real estate boom,” said Jonathan Hopper, Managing Director of Garrington Property Finders.
He added that estate agents in sought-after rural and coastal areas continue to be “inundated with inquiries and prices skyrocket”.
Both readings were much stronger than the 0.8% monthly expansion and 9.2% annual growth forecast by economists polled by Reuters.
Part of the growth is the result of housing tax relief, introduced in July of last year, in an attempt to revive the housing market after a slump in home sales in the first few months of the pandemic.
The policy exempts the first £ 500,000 of any property purchase in England or Northern Ireland from stamp duty and will be in effect until the end of June. A tax-free allowance of £ 250,000 available until the end of September.
However, Robert Gardner, Nationwide’s chief economist, said the need for more space following the increase in work has also contributed to the soaring house prices.
“It is the shift in housing preferences that continues to drive activity as people reassess their needs in the wake of the pandemic,” he said.
Nationwide reports that among those who were moving or were planning to relocate, about a third were looking to move to a different area, while nearly 30% were doing so for easier access to a garden or outdoor space.
“The majority of people are looking to relocate to less urban areas,” Gardner said.
He added that the short-term outlook remained “positive” for the UK property market, supported by government support for jobs and low borrowing costs.