UK house prices surge at the fastest rate in 16 years

  • UK house prices surge at the fastest rate in 16 years
  • Pandemic boom continues to drive UK property prices higher
  • British Chancellor Rishi Sunak’s stamp duty holiday creating upward price pressures
  • House buyers admit to securing property by gazumping

According to the latest data from Nationwide, UK house prices surged at the fastest annual rate in 16 years, with all areas of the country recording growth.

The data revealed that average house prices in Britain jumped 0.7% higher month-on-month in June to GBP 245,432 – an annual increase of 13.4%.

The building society said that figures showed that UK property prices had grown at their fastest rate since November 2004, with activity in the market buoyed by the extension of British Chancellor Rishi Sunak’s stamp duty holiday and the ongoing shift in buyer priorities.

Since the UK government imposed the first national lockdown in March 2020, there has been an exodus of people from metropolitan areas such as London, Manchester and Birmingham, with remote working allowing buyers to seek homes with more space in leafier regions.

Data from Rightmove revealed that searches for properties with gardens were up by 42% for buyers and 84% for renters month-on-month in May 2021, while over 33% of buyers and 25% of renters want a home office, with good broadband speed also higher up on the priority list.

Although housing market growth appears to be slowing, Nationwide Chief Economist Robert Gardner expects the property market to remain buoyant, noting that there are still signs of “significant momentum.”

Mr Gardner highlighted prices in June are almost 5% higher than in March, with the most substantial gains recorded in Wales and Northern Ireland.

Nationwide showed average property prices in Northern Ireland and Wales soared by 14% and 13.4% in Q2 2021. Meanwhile, Scotland and the UK’s capital, London, recorded the weakest house price growth at 7.1% and 7.3%, respectively.

London records weakest house price growth

According to Nationwide, London continued to see the weakest house price growth in the second quarter of the year, with homes in the capital city now averaging at GBP 509,935.

Commuter towns such as Luton, Watford, Sevenoaks and Woking, fared slightly better with an annual growth rate of 8.2%, but they remain in the bottom three regions for growth.

Meanwhile, cities in the south-east such as Brighton, Oxford, Winchester and Southampton recorded gains of 10.9% – the first time in eight years that house price growth in this region has hit double figures.

Property prices in the southwest region also reached their highest level since 2010, with prices up by more than 10% year-on-year.

London records weakest house price growth

Yorkshire and Humber remain a sought-after destination for renters and buyers, with house price growth in this area rising by an annual rate of 13%. The East and West Midlands posted growth of 12.2% in Q2, while prices were up 11.2% in the north of England.

Despite record horse prices, Nationwide’s chief economist said that mortgage payments are relatively low by historical standards courtesy of ultra-low interest rates stemming from the Bank of England’s (BoE) base rate of 0.1%.

The number of mortgage deals available in the market has risen by 1,433 to 4,234 from 2,810 in June 2020, with a significant number specifically aimed at first-time buyers.

Yet, first-time buyers have struggled to get onto the property ladder due to housing price growth outstripping wage income.

First-time buyers struggling to save for mortgage deposits

Although the shift in buyer priorities has contributed to the surge in property prices, most estate agents have said that the extension of the stamp duty holiday is fuelling price growth.

UK Chancellor Rishi Sunak introduced the tax break last year as part of a broader package of measures to support the UK economy through the coronavirus crisis.

The stamp duty holiday allows buyers to save up to GBP 15,000 on property in England and Wales with a GBP 500,000 threshold until June end. The Treasury will then reduce the threshold to GBP 250,000 before it concludes September-end.

Although lenders offer 5% mortgage deposits, the surge in property prices means that most deposits are now more than 50% of the typical first-time buyer’s average income.

First-time buyers prices out the property market

Even if this group saved 15% of their take-home pay, it would take them at least five years to raise a 10% mortgage deposit.

Bank of England outgoing economist Andy Haldane has already warned that astronomical house price gains would worsen the gap between the rich and poor, with those in the wealthier bracket in a far better position to buy.

The BoE indicated its unease over rising house prices following Nationwide’s June publication and said that it stands ready to intervene should the property market start to overheat.

It comes after the Monetary Policy Committee (MPC) voted to leave the base interest rate at 0.1% and its quantitative easing programme unchanged at GBP 895BN.

Although the UK economy is forecast to undergo a solid rebound in 2021, with the British Chambers of Commerce (BCC) predicting growth of 6.8% in 2021 and 5.1% in 2022, BoE policymakers said they would “lean strongly against downside risks to the outlook”.

Fears have also been expressed over the tapering down of the furlough scheme – due to conclude September-end – triggering a spike in unemployment.

However, Nationwide expects housing market activity to remain relatively buoyant even after schemes such as furlough and the stamp duty holiday conclude due to the massive shift in demand for larger properties with outdoor space.

In a survey conducted by the building society in May, Nationwide revealed that 6 in 10 homeowners were considering relocating irrespective of the stamp duty incentive.

Separate data published by the UK lender has also shown that the number of approved mortgages has surged.

Mortgage lending soars to record highs

With competition intensifying among lenders, the number of cheap mortgage deals available has increased, helping more buyers get a foot on the property ladder.

According to the latest data, mortgage approvals were up 87,500 in May from 9,444 the previous year – an 827% annual increase.

Figures from the Bank of England also showed that borrowing increased in May, with mortgage borrowing rising to GBP 6.6BN last month following April’s GBP 3BN plunge.

However, borrowing remains well off levels recorded in March, when net mortgage borrowing surged to GBP 11.4BN in anticipation of the original termination of the stamp duty holiday.

Still, with the threshold on houses being reduced from GBP 500,000 to GBP 250,000 starting July 1st, analysts expect another spike in borrowing for June.

Although affordability remains a threat to housing market activity, Capital Economics Property Expert Andrew Wishart believes “other factors buoying buyer demand will prevent a sustained dip in property market activity.”

While first-time buyers are being priced out of the market due to the disproportionate impact COVID-19 lockdowns have had on income, experts believe that record-low interest rates and affordable homeownership schemes will continue to boost activity, at least in the near term.

Nationwide’s chief economist Robert Gardner noted: “There have been ongoing signs of underlying buyer confidence and with lending costs at record lows and supply far and few between, this will more than likely create further upward pressure on prices.”

However, Mr Gardner notes that the long-term outlook is more challenging to predict and expects housing market activity to soften following the termination of the tax break in September.

Over a third of Britons said they secured property by “gazumping”

If you’re wondering what “gazumping” is, it’s when a buyer places a higher offer on a property that someone else is already in the process of buying. The seller rejects the initial offer to maximise the potential earnings they could make from selling the property.

Gazumping is entirely legal in Britain and has become one of the most used methods of securing property since the novel coronavirus gripped Britain.

It is also one of the most common reasons for failed house sales, which has struck fear into many house hunters desperate to secure a home before the stamp duty ends.

According to new research from, nearly 40% of buyers in Britain admitted to securing property by gazumping over the past year, which could rise further due to a lack of supply.

Buyers engaging in gazumping to secure UK property

Approximately 38% of failed transactions recorded last year were due to gazumping. A recent study also revealed that more than 70% of prospective buyers would be prepared to partake in this method if it meant securing their dream home.

However, 81% of homebuyers waiting for the contracts to be exchanged are concerned that another potential buyer might swoop in and steal their property by gazumping.

However, the stress caused by gazumping has also seen many homebuyers pay over the odds, with nearly 40% of those surveyed revealing that they spent more than GBP 16,000 than the asking price to secure their dream home.

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