Skip to Content
MarketWatch

Not just an American headache, as a 'race for space' sends U.K. house prices soaring

By Lina Saigol

Bank of England is monitoring housing boom as it weighs inflation: report

The "race for space" sent U.K. house prices soaring to their highest level in nearly seven years in May, as the COVID-19 pandemic encouraged people to move to bigger properties in less urban areas.

Annual house price growth reached double digits (link) in May, rising 10.9% year-over-year, to a record average price of GBP242,832 ($344, 433), data from mortgage lender Nationwide Building Society showed on Tuesday. Monthly, prices were up 1.8%, following a 2.3% rise in April.

Robert Gardner, Nationwide's chief economist, said shifting housing preferences were continuing to drive activity as people reassessed their needs in the wake of the pandemic. "Of those moving or considering a move, around a third were looking to move to a different area, while nearly 30% were doing so to access a garden or outdoor space more easily," he added.

The strong figures from the housing market lifted the housebuilding sector. Taylor Wimpey's shares rose 1.40% in early morning London trading on Tuesday, while Barratt Developments' stock was up 1.84%, and Berkeley Group increased 1.03%. Shares in Persimmon jumped 2.25%.

Read: Surging U.S. housing market faces test as people start heading back to offices (link)

Bank of England deputy governor Dave Ramsden said in an interview published in the Guardian (link) on Tuesday that the central bank was carefully monitoring the U.K.'s booming housing market, as it weighs up the possibility that a rapid recovery from the COVID-19 pandemic will lead to a sustained period of inflation.

"There is a risk that demand gets ahead of supply and that will lead to a more generalized pickup in inflationary pressure. That's something we are absolutely going to guard against. We are looking carefully at the housing market and a raft of real-term indicators," Ramsden told the Guardian.

Read: Home prices rise at fastest pace since 2005 -- here's where they soared the most (link)

The supply-and-demand imbalance is also in focus in the U.S., where home-price gains continue to accelerate. Home prices in the 20 major metropolitan areas tracked by the S&P CoreLogic Case-Shiller 20-City Composite Home Price index (link) grew 13.3% annually in March, according to data released last week. Monthly, home prices were up 1.6%.

Nationwide's Gardner said there was scope for annual house price growth to accelerate further in the coming months, as a result of the stamp duty holiday extension -- stamp duty is a property tax on buyers and the government has temporarily lifted it as part of its pandemic response. Gardner also mentioned additional support for the labor market included in the Chancellor of the Exchequer's budget, especially given continued low borrowing costs and improving credit availability.

But he cautioned that, if unemployment rises sharply later in 2021, there was scope for activity to slow, perhaps sharply. "Though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained," Gardner noted.

-Lina Saigol; 415-439-6400; AskNewswires@dowjones.com

 

(END) Dow Jones Newswires

06-01-21 0659ET

Copyright (c) 2021 Dow Jones & Company, Inc.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.