UK house prices grew at their fastest rate since July 2018 in February, according to Nationwide figures released today.
February’s annual rise of 2.3 per cent, up from 1.9 per cent in January, was UK house prices’ strongest rate of growth in 18 months.
That left the average UK house price at £216,092, up from January’s £215,897 despite the economy flatlining in the last quarter of 2019.
Prices rise but uncertainty clouds 2020
Nationwide’s chief economist, Robert Gardener, said it was a sign of gathering momentum in the UK housing market.
“While overall economic growth ground to a halt in the final three months of 2019, labour market conditions remained buoyant and borrowing costs low,” he said.
“The decisive election outcome may have provided a boost to buyer sentiment.”
But he warned that the economy faces “significant uncertainties” that could hurt UK house prices. The coronavirus outbreak and Brexit trade talks are chief among those challenges.
“The global economic backdrop remains challenging, with the coronavirus outbreak expected to weigh on global activity in the coming quarters,” he said.
“Investment is likely to remain subdued until the UK’s future global trading relationships become clearer, which is unlikely until early next year.
“Overall, we expect the UK economy to continue to expand at a modest pace in 2020, with house prices remaining broadly flat in 2020 as a whole.”
February’s monthly rise of 0.3 per cent marks the fifth monthly hike in UK house prices – the first time since May 2016 this has happened.
And house prices rose one per cent in the three months to the end of February compared to the previous three to deliver the highest such rate in two years.
Brexit clarity gives UK house prices a bump
More clarity on Brexit – despite fresh uncertainties over the likelihood of a trade deal – boosted UK house prices, economists said.
“The housing market has seemingly got a leg-up from increased optimism and reduced uncertainties following December’s election,” Howard Archer, chief economic adviser to the EY Item Club, said.
That led EY to increase its 2020 outlook for UK house price growth from 2.8 per cent to three per cent. EY’s forecast had sat at two per cent at the turn of the year.
Boris Johnson’s December General Election victory also played a major part.
“The housing market is continuing to strengthen in the wake of the General Election,” Samuel Tombs, UK economist at Pantheon Macroeconomics, said.
“Other surveys suggest that this momentum will be largely maintained. Asking prices rose at a 2.9 per cent year-over-year rate in February, according to Rightmove. In addition, the RICS survey showed the largest net balance of surveyors for four years in January expected house prices to rise over the next three months”
But Brexit trade talks still a fear factor
“However, the economy still looks set for a pretty challenging 2020,” Archer added. “There will still be appreciable uncertainties, including on the UK-EU relationship front – so that the upside for house prices in 2020 is likely to be limited.”
Coronavirus could hurt UK house prices
Marc von Grundherr, director of estate agent Benham and Reeves, warned the coronavirus outbreak could hurt UK house prices, however.
“As the world continues to tackle the Covid-19 pandemic, there are murmurings it could impact house prices as well as health across the domestic market,” he said.
“At this stage and while UK cases remain few and far between it remains unlikely. Foreign investors at the very highest level might be pausing to take stock. But it’s probably not one that will be felt by the average UK home buyer or seller.”
Mansion tax to hit London?
Von Grundherr said buyers and sellers will be more mindful of next month’s Budget, where a possible so-called mansion tax could hurt London house prices.
“A potential mansion tax via next month’s budget is far more likely to dent the sentiment of London’s high end foreign investors in particular, although they are arguably best placed to stomach such a hit. “