UK house prices hit new high in August - Halifax

Annual house price growth hit a new high in August thanks in part to pent-up demand following the Covid-19 lockdown, according to figures released on Monday by mortgage lender Halifax.

House prices rose 5.2% on the year to £245,747, up from 3.8% growth in July and marking the strongest level of growth since late 2016. On the month, prices were up 1.6% following a 1.7% increase in July.

Halifax managing director Russell Galley said: "A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and of course the temporary cut to stamp duty.

"Notwithstanding the various positive factors supporting the market in the short-term, it remains highly unlikely that this level of price inflation will be sustained. The macroeconomic picture in the UK should become clearer over the next few months as various Government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent.

"Rising house prices contrast with the adverse impact of the pandemic on household earnings and with most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices in the medium-term."

The EY Item Club said the current gains in the housing market are likely to be unsustainable sooner rather than later due to challenging fundamentals for consumers.

"Despite the current robust firming in activity and prices, the EY Item Club suspects that the housing market will come under increasing pressure over the final months of 2020 and start of 2021 when there is likely to be a significant rise in unemployment," it said. "There is also likely to be a fading of the pent-up demand effect."

It said the housing market is likely to remain under pressure over the early months of 2021, although some temporary support in the first quarter will likely come from buyers looking to take advantage of the Stamp Duty threshold increase before it ends on 31 March - " although there is always the possibility that the Chancellor could extend it in the Autumn Budget".