- 2nd September 2020
- Posted by: DMM
- Category: Uncategorised
The news for property developers got even more interesting in August with expectations signalling continued growth in house prices.
Hot on the heels of positive house price growth in July and talk of a mini-boom, the Nationwide release their report showing prices recover to reach a new all-time high in August.
The monthly Nationwide House Price Index shows house prices picked up in August with an annual change of +3.7%, being a 2.0% monthly increase taking into consideration seasonal factors. That brings the average house price to £224,123, not seasonally adjusted.
Expectations signalling continued growth is positive momentum for property developers seeking to achieve GDV targets.
Expectations Signalling Continued Growth in August
Robert Gardner, Nationwide’s Chief Economist, said: “UK house prices rose by 2.0% in August, after taking account of seasonal effects, following a 1.8% rise in July. This is the highest monthly rise since February 2004 (2.7%). As a result, annual house price growth accelerated to 3.7%, from 1.5% last month.“
“House prices have now reversed the losses recorded in May and June and are at a new all-time high. The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.”
“This rebound reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing. Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown. Our own research, conducted in May, indicated that around 15% of people surveyed were considering moving as a result of lockdown. Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this point.”
Robert goes on to say: “These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward. However, most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
Consequently, those of us in the property development industry must consider the longer outlook.
The Royal Institution of Chartered Surveyors survey in August also reported that “near term expectations are signalling continued growth in sales at the headline level over the next three months.”
However, their survey is a monthly sentiment survey of Chartered Surveyors who operate in the residential sales. Their expectations signalling continued growth in the longer term was rather more guarded.
The RICS respondents report their opinion as “further out, twelve-month sales projections remain negative. Indeed, a net balance of -10% of respondents foresee sales tailing off over the year ahead, as caution remains on the likely reaction across the market once the furlough scheme is phased out in October and the Stamp Duty holiday expires after March 2021.”
We will continue to watch the monthly statistics closely and see how the trends pan out as the government support schemes come to a close. Property developers can, in the meantime, compare property development finance by clicking here!