(Bloomberg) — U.K. house prices grew at their fastest annual pace for more than 17 years in June, suggesting the market has maintained momentum as coronavirus restrictions eased.
Values were 13.4% higher than a year earlier, the biggest gain since November 2004, Nationwide Building Society said Tuesday. Prices rose 0.7% from May to 254,432 ($353,000), their third consecutive monthly increase.
Demand for property has been fueled by consumers seeking more space outside urban areas after 16 months of lockdowns to control the pandemic. The market also is benefiting from borrowing costs near a record low and a temporary tax break on purchases.
“Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows,” said Robert Gardner, Nationwide’s chief economist.
The Treasury will phase out the tax holiday from June 30, and it will end altogether on Sept. 30. However, agents agents expect the market to remain buoyant as the economy reopens and millions of people move back into work.
The boom, which has been partly fueled by cheap borrowing costs, is now raising concerns at the Bank of England. Chief Economist Andy Haldane, who steps down from his post this month, has warned of growing inequality between homeowners and younger people unable to afford to get onto the property ladder.
“Underlying demand is likely to remain solid in the near term as the economy unlocks,” Gardner said. “Consumer confidence has
rebounded while borrowing costs remain low. This, combined with a lack of supply on the market, suggests further upward pressure on prices. But as we look toward the end of the year, the outlook is harder to foresee.”