UK house prices grew at their fastest annual pace for more than 17 years in June, adding to a growing wealth gap that is worrying policy-makers.
Values were 13.4 per cent higher than a year earlier, the biggest gain since November 2004, Nationwide Building Society said on Tuesday. Prices rose 0.7 per cent from May to £254,432, their third consecutive monthly increase.
Demand for property has been fuelled 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.
Regional data shows all parts of the UK saw accelerating prices, the largest of which were in Northern Ireland and Wales with 14 per cent and 13.4 per cent respectively.
Scotland and London were the weakest performing regions, though the capital still saw a pick-up in growth to 7.3 per cent from 4.8 per cent in the previous quarter.
The treasury will phase out the tax holiday from June 30th, and it will end altogether on September 30th. However, estate 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 fuelled 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 on to 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.” – Bloomberg
