According to Nationwide’s latest house price index, this month-on-month gain was the second largest UK property prices have seen in 15 years.
It meant annual house price growth increased to 11 per cent in August, from 10.5 per cent in July, while prices are now 13 per cent higher than before the pandemic.
“House prices are now around 13 per cent higher than when the pandemic began,” said Robert Gardner, Nationwide's chief economist.
“The monthly price increase was substantial,” Gardner continued. “[This] bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market.”
From October 1, stamp duty tax relief will return to its pre-pandemic threshold of £125,000 - having already been reduced to £250,000 in July.
Gardner reckons as the UK looks towards the end of the year, “the outlook is harder to foresee”.
He explained: “Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down.”
Shortage of stock
The sharp rise in house prices during August is largely down to a glaring gap which remains between the supply of, and demand for, UK homes.
“Prices are still underpinned by an acute shortage of stock in some areas but ample supply of mortgage finance,” said Jeremy Leaf, north London estate agent and Royal Institute of Chartered Surveyors' former residential chairman.
His comments were echoed by David Hollingworth, associate director of communications at L&C Mortgages, who said: "The house price index from Nationwide really underlines that there’s more than sufficient demand for the limited amount of property available on the market.
"Whilst there was always likely to be a spike in transactions before the change in stamp duty at the end of June, and therefore a subsequent reduction in activity, the level of supply is not such that the demand is necessarily being easily met."
He added: "Mortgage rates remain extremely low but we will also have more clarity emerging for employees as businesses firm up their approach to working from home. That could also shore up demand with a continuing focus on available space at home or even an ability to look further afield for some, if commuting will no longer be a necessity."
Lenders have been cutting their rates to record lows in recent months, but sales have nevertheless been down, which some suggested was linked to stock shortages.