Residential property prices are set to continue rising beyond the stamp tax holidays this year as lifestyle changes continue to fuel market demand.
House prices rose 10.9% annually in May, the fastest growth in nearly seven years, according to Nationwide’s House Price Index.
Double-digit house price growth last month was followed by a 7.1% annual increase in April, the figures show.
Across the UK, property values hit a new record high of £ 242,832 – an increase of £ 23,930 from 12 months earlier.
Sam Mitchell, CEO of online real estate agent Strike, said: “Unlike UK weather, the UK property market was scorching hot in May and house prices showed no signs of cooling.
“The fast approaching stamp duty deadline has helped send the market into a frenzy, but there are other factors at play here. A sense of normalcy returns as restrictions are lifted and vaccination rollout progresses, while we have also seen a significant increase in the 95% mortgage offering, which has helped more first-time buyers enter the market.
“Many will wonder if this level of demand will continue when the stamp duty holidays wear off, but let’s not forget that the UK is still facing a major problem of supply and demand imbalance. A lack of new stock, especially houses with outdoor space and in rural locations, will drive prices up further as they will be outweighed by demand. Also, the government may have something else up its sleeve to support the market once the stamp duty vacation is over. “
Iain McKenzie, CEO of The Guild of Property Professionals, agreed: “At a time when much of the country seems to be regaining a sense of normalcy, we expect the real estate market to follow suit. But he says the numbers show that the market didn’t get the memo. “
He added, “The frenzy of getting hold of a property at the end of a pandemic shows no sign of ending, with double-digit house price growth in May – the highest we’ve seen in the best part of a decade.
“The success of stamp duty leave certainly contributed, as did the savings many have made while working from home.”
But Lucy Pendleton, head of real estate agents James Pendleton, is among those who anticipate a slowdown in price growth.
She said, “Such a fierce appreciation is certainly attention-grabbing, but when real estate hits double-digit growth it’s usually a quick look at the sun before falling back to earth.
“That will likely happen in July due to the impact of a two-month hiatus in house price growth last year.”