UK house prices post biggest monthly increase since 2004

[LONDON] UK house prices increased by the most in 16 years in August after a tax cut stoked demand, according to Nationwide Building Society.

Values rose 2 per cent from a month earlier to an average of £224,123 (S$407,500), the mortgage lender said on Wednesday. On an annual basis, prices rose 3.7 per cent.

"House prices have now reversed the losses recorded in May and June and are at a new all-time high," said Robert Gardner, Nationwide's chief economist. The stamp-duty holiday "will serve to bring some activity forward".

The housing market came to a standstill during the coronavirus lockdown. To get it going again, Chancellor of the Exchequer Rishi Sunak in July temporarily waived stamp duty on the first £500,000 of any property purchase.

The question now is how long the boost can be sustained. Government support measures will start to run out next month, and unemployment is expected to rise. Nationwide said activity could weaken in the next few quarters.

The pound was little changed after the report, trading at US$1.3377 as at 7.16am in London. It comes hours before Bank of England governor Andrew Bailey is due to address lawmakers on the economic impact of the coronavirus.

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The housing market in England reopoened in May, with Wales, Scotland and Northern Ireland following suit a month later. Mr Gardner said social distancing is not having the "chilling effect" that had been feared.

"Pent up demand is coming through, where decisions taken to move before lockdown are progressing," he said. "Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown."

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