House prices have reached a new record high after bouncing back from falls earlier this year with the biggest rise since 2004 last month, according to figures from Nationwide.
Prices rose by 2% in August compared to the previous month or 3.7% compared to a year ago, adding to evidence of a rapid recovery after coronavirus lockdown restrictions were eased.
The figures came as house builder Barratt Homes reported a 46% slump in profits to £492m for the year to the end of June, which it blamed on “unprecedented disruption to sales”.
But it said it was now seeing “very strong consumer demand”, with forward sales in more recent weeks ahead of the same time last year.
The average house price now stands at £224,123, according to the Nationwide index. The monthly rise of 2% was the largest since February 2004.
Nationwide’s chief economist Robert Gardner said: “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.”
Mr Gardner cited a number of factors, including the release of pent-up demand after the lockdown, as well as people reassessing where they want to live after being forced to stay at home.
He added that social distancing “does not appear to be having as much of a chilling effect as we might have feared”.
Barratt cited similar factors as well as a stamp duty holiday announced in July to explain its most recent upturn, with shares up 7%.
But it also warned of uncertainty over the full economic impact of the pandemic, as well as negotiations over Britain’s departure from the EU.
Howard Archer, chief economic adviser to the EY ITEM Club, said a further pick-up in housing market activity and prices was likely, but that this would be limited “due to challenging fundamentals for consumers”.
“The EY ITEM Club suspects that the housing market is likely to come under pressure over the final months of 2020 and start of 2021 due to a significant rise in unemployment,” he said.
“There is also likely to be a fading of the pent-up demand effect.”
The Nationwide figures come a day after Bank of England statistics showed a further rise in mortgage approvals to 66,300 in July – though this was still below February’s pre-pandemic level of 73,700.
Figures from property website Zoopla last week showed homes were taking 12 days less to sell in the period since the lockdown.
However, separate Bank of England figures suggest that mortgages could become harder to obtain in coming months with lenders cutting the availability of credit.