U.K. House Prices Post Double-Digit Growth as Boom Gathers Pace
U.K. house prices recorded double-digit growth for the first time since 2014 last month, as the nation’s booming market showed no signs of cooling.
Prices climbed 10.9% from a year earlier, Nationwide Building Society said Tuesday, with the lender saying the increase has been driven by buyers shifting their preferences in the wake of the pandemic. On the month, prices rose 1.8%, double the pace economists had expected.
The U.K. market has surged since the end of the nation’s first lockdown, defying a wider economic slump. It’s being fueled both by tax incentives and a desire among buyers for extra space. While those figures don’t feed through to Britain’s main inflation indicators, the Bank of England is watching the market as it weighs when to pare back economic stimulus.
“It is shifting housing preferences which is continuing to drive activity,
with people reassessing their needs in the wake of the pandemic,” said Robert Gardner, chief economist for Nationwide. “Given that only around 5% of the housing stock typically changes hands in a given year, it only requires a relatively small proportion of people to follow through on this to have a material impact.”
In an interview with the Guardian Tuesday, Bank of England Deputy Governor Dave Ramsden said the institution is carefully monitoring the U.K.’s booming housing market as it weighs the possibility that a rapid recovery from the pandemic will lead to sustained inflation.
“We are looking carefully at the housing market and a raft of real-term indicators,” he said. “There is a risk that demand gets ahead of supply and that will lead to a more generalized pick-up in inflationary pressure. That’s something we are absolutely going to guard against.”
The Office of National Statistics said earlier this month that prices climbed at the fastest pace since the financial crisis in March, although some are predicting the market may run out of steam when a tax cut starts to expire next month.
“Further ahead, the outlook for the market is far more uncertain,” said Gardner, the Nationwide economist. “If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences.”
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