House prices rise 10.9% from year to May, but could fall back to earth in the summer

House prices rose 10.9 percent annually in May, marking the strongest growth in almost seven years.

Double-digit growth in house prices in May followed a 7.1 percent annual increase in April, according to Nationwide’s House Price Index.

Across the UK, property values ​​hit a new record high of £ 242,832 – an increase of £ 23,930 from 12 months earlier.

House prices are up nearly 11% over the past year, according to Nationwide

The numbers sparked a debate among experts about whether the property price boom could be followed by bankruptcy.

Lucy Pendleton, real estate expert at independent real estate agent James Pendleton, said, “Such a strong appreciation is certainly eye-catching, but when properties like this have double-digit growth it is usually a quick glimpse into the sun before they fall back to earth.

“That will likely happen in July due to the impact of a two-month hiatus in house price growth last year.”

Nationwide said home prices rose 1.8 percent in May, after rising 2.3 percent in April.

Activities in the real estate market collapsed after the first national lockdown in spring 2020, but recovered strongly over the past year.

This was driven by the government’s introduction of a pandemic-triggered holiday and lifestyle change.

Nationwide Chief Economist Robert Gardner said, “A year ago activity collapsed after the initial lockdown and real estate transactions fell to a record low of 42,000 in April 2020.

However, towards the end of last year and through 2021, activity spiked, hitting a record high of 183,000 in March.

“It’s a shift in housing preferences that is driving activity further and people are re-evaluating their needs after the pandemic.”

At the end of April, 25 percent of homeowners surveyed said they were either moving or considering moving as a result of the pandemic, according to Nationwide – just slightly below the 28 percent recorded in September last year.

As a rule, only around 5 percent of the housing stock changes hands in a given year.

Of those moving or considering moving, a third (33 percent) wanted to move to another area, while nearly 30 percent did so for easier access to a garden or outdoor area.

Miles Robinson, head of mortgages at online mortgage broker Trussle, warned shoppers in hopes of taking advantage of the stamp duty vacation, which in its current form will run through the end of June before the relief level is lowered.

“There is a chance that the upcoming stamp duty deadline will create a false economy of bidding wars in which house prices will rise above their original value,” he said.

‘This carries the risk of buyers downgrading the creditors’ rating during the mortgage process. Even if the applications are successful, homeowners could find themselves in negative equity later.

“If you save a little more time on your deposit, you may have a better chance of finding and securing the right home for you in the future.”

Iain McKenzie, CEO of The Guild of Property Professionals, also warned buyers about the “fear of missing out”.

“With a record breaking new average home price up nearly £ 24,000 in the past 12 months, it is worth thinking about how your potential savings might not outweigh the inflated price of your new home,” he said.

‘It is still critical that potential buyers enter the process with a solid understanding of the market and what the new property wants.

‘When market demand increases, the added competition creates fear of missing out on something that can distract buyers from fundamentals. It is important that the current real estate hype does not divert attention from what you are really looking for. ‘

Some of the links in this article may be affiliate links. If you click on it, we may receive a small commission. This helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any business relationship that affects our editorial independence.

Source link

Exit mobile version