Annual house price growth increased by 3.7% in April, indicating a strong market prior to Covid-19 lockdown, but the impact this will have on the housing market remains unknown.
Nationwide reports in its new House Price Index that this increase is up from 3% in March, meaning the average house price in the UK is now £222,915.
Nationwide’s data is based on mortgages approved in April but submitted earlier, which could explain the apparent growth during lockdown.
It has been forecasted that the Covid-19 pandemic could lead to a decline in house prices by the end of 2020, although experts disagree on by how much.
Robert Gardner, chief economist at Nationwide, says the government’s economic intervention could be crucial in limiting the economic damage once the pandemic passes.
“The raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy,” he said.
“These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.”
A Turbulent Year for House Prices
The year began exceptionally well for the housing sector, with asking prices close to an all-time high, and house prices increasing by an average of 11% since Britain officially left the European Union.
But the government’s lockdown restrictions have ground the market to a halt. Few homes have been put up for sale and site visits are extremely difficult; many buyers can’t buy and vendors can’t sell. This led Rightmove to cancel its April report on asking prices, citing the lack of data would render the report meaningless.
Last week, however, Zoopla said there was evidence to suggest that the housing sector could be rebounding, and that demand for housing is increasing.
The new Nationwide data appears to reinforce this optimism but Gardner advises caution of the interpretation of the data, stressing that uncertain times lie ahead for months to come.
He said: “The medium-term outlook for the housing market is highly uncertain, where much will depend on the performance of the wider economy.
“Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.”