UK house prices are surging at their fastest rate in four years, as pent-up demand post-lockdown and a temporary stamp duty cut fuel a buying boom.
Nationwide’s closely-watched House Price Index found prices jumped by 5% on an annual basis in September, the biggest increase since September 2016.
Prices grew by 0.9% between August and September. Both the annual growth figure and the month-on-month growth were ahead of City forecasts.
The average UK house price now stands at £226,129 ($288,167), Nationwide said.
Watch: Why house prices are rising despite COVID-19 and a recession in the UK
“The rebound reflects a number of factors,” said Robert Gardner, Nationwide’s Chief Economist.
“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.”
Gardner said the pandemic was encouraging people to move. Lockdowns and working from home have spurred many people to look for new properties with more space and a garden, with less concern about commuting distance.
READ MORE: UK mortgage approvals hit highest level since 2007
25% of people surveyed by Nationwide in London said they were moving as a result of the lockdown, while another 15% of residents in the capital were thinking about moving.
All regions of the UK saw house prices grow between July and September. The highest growth was in the South West of England, where annual price growth was 5.5%.
Nationwide’s price data comes a day after the Bank of England said mortgage approvals hit a 13-year high in August, underlining the strength of the property boom.
Experts believe the property market could loose steam in the coming months as the government’s economic support measures unwind.
“Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as tighter restrictions dampen economic activity and the furlough scheme winds down,” said Gardener.
“While the recently announced jobs support scheme will provide some assistance, it is not as comprehensive as the furlough scheme it replaces.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We continue to expect the official measure of prices to peak in October, and then to reverse all of its gains since March over the following 12 months.”
Estate agents Hamptons expects house prices to fall across much of the UK next year.