Average house prices reach record high of £231,068

‘Surprise’ acceleration sees property values increase 6.9% annually

Samuel Osborne
Tuesday 02 March 2021 11:08
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For Sale and Sold signs outside houses in north London
For Sale and Sold signs outside houses in north London

The average UK house price reached a record high of £231,068 in February, according to an index.

Property values increased by 6.9 per cent annually, up from 6.4 per cent in January, in what the Nationwide Building Society House Price Index described as a “surprise” acceleration.

Although a stamp duty holiday is due to end on 31 March, there have been reports it could possibly be extended for another three months.

Robert Gardner, Nationwide's chief economist, said: "February saw the annual rate of house price growth rebound to 6.9 per cent, from 6.4 per cent in January. House prices rose by 0.7 per cent month-on-month, after taking account of seasonal effects, more than reversing the 0.2 per cent monthly decline recorded in January.

"This increase is a surprise. It seemed more likely that annual price growth would soften further ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase."

Mr Gardner added: "Many people's housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook."

Howard Archer, chief economic adviser to the EY ITEM Club said house prices are predicted to fall by around 3 per cent over 2021.

He said: "This had been revised from an expected decline of 5 per cent given the housing market measures expected in the Budget.

"The EY ITEM Club expects housing market activity to gradually improve late on in 2021 allowing prices to stabilise as the UK's economy establishes a sustained firmer footing and the labour market comes off its lows.

"Very low borrowing costs should also help with the Bank of England unlikely to lift interest rates from 0.10 per cent during 2021 and for some time thereafter."

Tomer Aboody, director of property lender MT Finance, said: "An increase in house prices in February further confirms that even though the stamp duty holiday was earmarked to end shortly, buyer demand and desire for more space - both inside and out - outweighs any potential saving."

Tom Bill, head of UK residential research at Knight Frank, said: "Price growth strengthened in February due to a relative imbalance between supply and demand.

"While it is a relatively straightforward process to register as a buyer, sellers have held back, which has led to a shortage of supply that has put upwards pressure on prices.

"Sellers who are home-schooling or simply concerned about opening their home to viewings due to new Covid variants have hesitated in the first two months of the year.

"With the return of schools and Covid cases falling, more sellers are now gearing up to list their property, which will put downwards pressure on prices from this month.

"Any extension of the stamp duty holiday in the Budget will exacerbate this trend as more owners believe they will be able to complete before the end of June. While we expect downwards pressure in the second quarter of the year, we expect flat prices over the course of 2021 as more seasonality and balance between supply and demand returns from the summer."

Additional reporting by Press Association

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