This headline may come as quite a shock to many as the country’s economic climate continues to look bleak after the fallout of coronavirus. According to Nationwide’s latest House Price Index, house prices rose 0.9% between August and September 2020, putting them 5% higher than this time last year. They are at the highest rate since September 2016.

Nationwide’s chief economist, Robert Gardner, spoke up about the situation:

“The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing. The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.”

According to the report, the average house price in the UK is now £226,129 and since lockdown measures were eased back in May, the prices have risen with demand. These prices have been boosted directly by coronavirus, as buyers have been given a Stamp Duty holiday and they’re also now re-evaluating living arrangements now that we’re all working from home.

Mortgage approvals are also at the highest they’ve ever been since 2007; they’ve been steadily rising from over 66,300 in July to 85,500 in August and then 91,500 in September according to the Bank of England.

“These averages are useful for macroeconomic analysis but for your average homeowner, it’s what’s happening locally that matters,” said Richard Donnell – head of research, Zoopla.

“There’s thousands of housing markets out there, each with their own distinct trend, and there’s parts of the country where the market remains weak.”

First-time buyers demand is dropping

According to a report released by Zoopla this week, first-time buyers are being squeezed out of the market largely due to the restrictions placed on the large loan-to-value mortgages, which first-time buyers often rely on.

Robert Gardner said: “Younger people were much more likely to have put off plans than older people, which may reflect concerns about employment prospects.”

With the government’s furlough scheme coming to an end at the end of the month, it is likely that there will be a spike in unemployment. Therefore, young people have more worries about job security.

The Nationwide report also found that existing homeowners account for a growing proportion of the buying market due to a change in lifestyle preferences. A large percentage of London homeowners are moving/considering a move as the need to be in London has decreased with remote working opportunities.

Others have chosen to move because they want more outdoor space due to lockdown restrictions.

View the full Nationwide report here.

Predictions for the buying market

Rishi Sunak has announced the new Job Support Scheme, which is to replace the Coronavirus Job Retention Scheme and it is nowhere near as generous. It certainly will not protect all jobs and many companies will have to let their staff go. As a result, there will be a big spike in unemployment, which many economists will believe means that house prices are likely to fall.

Coronavirus rates are now rising rapidly and Boris Johnson has introduced a new tiered system and local lockdown measures. He’s announced that these restrictions could go on well into 2021, which poses more questions for the economy.

The Stamp Duty holiday, which raised the threshold for tax to kick in at £500,000 instead of £125,000 is set to end in March 2021. This measure can save buyers up to £15,000 and is strong incentive for buying properties at the moment. Once this measure is set back to normal, it is likely that the demand will drop.

Despite this, many experts believe the property market will continue to get stronger. Savills, the estate agency, originally anticipated a 5-10% fall in prices in March, following the lockdown. However, they just revised their forecasts and they now predict that prices will rise 4% this year and plateau in 2021.

These forecasts assumes that a COVID-19 vaccine becomes available during 2021, the market does not see a further lockdown and interest rates remain at a record low.

“The pace of change in the UK housing market has taken us all by surprise over the past few months suggesting normal rules simply don’t apply.” Lucian Cook, Savills head of residential research.