Pandemic boom drives house prices up 20%, Nationwide says

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House prices have soared 20% in the two years since the start of the coronavirus pandemic and the average house has risen by £29,000 in the past year alone, figures revealed today.

Britain’s biggest building society, Nationwide, said the pandemic property boom was continuing, with the average house price rising by nearly £5,000 or 1.7% last month to top £260,000 for the first time.

House price inflation soared to 12.6% in February, with the average house costing between £260,320 and £44,138 more than in February 2020.

Top to bottom: Home prices dipped slightly as the pandemic hit, then soared as a boom took hold, Nationwide index shows

After a brief dip following the arrival of the initial Covid lockdown in the UK in March 2020 and the property market freezing until later in the spring, property prices then began to rise later this year- the.

This has created a new affordability crisis in the UK property market, driving the cost of a house relative to wages from already high levels to peaks seen just before the financial crisis.

Analysts expect the cost of living crisis to drag the market down, but the household budget crisis has yet to make a big splash.

Nationwide Chief Economist Robert Gardner said: “Housing market activity has remained robust in recent months, with mortgage approvals continuing to top pre-pandemic levels at the start of the year. The combination of robust demand and a limited inventory of homes on the market kept upward pressure on prices.

“The continued buoyancy of the housing market is somewhat surprising, given the mounting pressure on household budgets from rising inflation, which hit a 30-year high of 5.5% in January, and since Borrowing costs have started to rise from all-time lows in recent months.

“The strength is particularly noteworthy since the compression of household incomes has led to a significant weakening in consumer confidence.

“Indeed, consumer sentiment on the general economic outlook and the outlook for their own financial situation over the next 12 months has plunged towards levels that prevailed at the start of the pandemic.”

Inflation pain: The pandemic boom has led to an affordability crisis, with house prices reaching record highs relative to wages – like just before the financial crisis

Inflation pain: The pandemic boom has led to an affordability crisis, with house prices reaching record highs relative to wages – like just before the financial crisis

An acute shortage of homes for sale is believed to be driving the price increases, as it increases competition for those that become available.

On average, there are currently 19 homes for sale per estate agency office, compared to an average of 552 registered house hunters, according to Propertymark, the member body for estate agents.

This means that a typical real estate agent has 29 potential buyers for each available property.

Out of stock: there are many more buyers on the market than houses for sale

Out of stock: there are many more buyers on the market than houses for sale

Jonathan Hopper, CEO of Garrington Property Finders, said: “Competition remains extremely tough for homes in the most desirable areas.

“The most sought-after properties sell out within days or even hours, and some sellers are still putting potential buyers through a beauty contest, foregoing the usual niceties of offers and counter-offers, and moving straight to the ‘best and final’ “.

“That means many buyers still have to be very tactical.”

But despite the record growth, some experts are predicting that rising interest rates and the rising cost of living could curb rising house prices in the months ahead.

Andrew Montlake, managing director of UK-wide mortgage broker Coreco, said: “The herculean performance of the property market in February was driven by still galloping demand and an unprecedented lack of homes for sale.”

“Don’t expect this pace of growth to continue, as there are countless headwinds ahead.

Interest rates are expected to rise further to contain spiraling inflation, tax hikes are looming ever closer, and energy and grocery bills are skyrocketing.

“Going forward, people’s borrowing power is likely to decline as lenders factor in these additional costs, causing the market to cool.”

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