UK House Price Inflation Fastest Since 2004

UK house prices increased the most since early 2004 as the property market showed signs of recovery following the easing of lockdown restrictions, data from Nationwide Building Society showed Wednesday.

House prices advanced by more-than-expected 2 percent on month in August, faster than the 1.8 percent rise seen in the previous month.

This was also the fastest growth since February 2004. Economists had forecast a monthly increase of 0.5 percent.

On a yearly basis, growth in house prices accelerated to 3.7 percent from 1.5 percent in July. Prices were forecast to advance 2 percent.

"The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions," Robert Gardner, Nationwide's chief economist, said.

Gardner said the 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," said Gardner.

According to Gardner, this trend is 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, the labor market conditions are forecast to weaken significantly in quarters ahead, which would likely dampen housing activity once again in the quarters ahead.

Data released by the Bank of England on Tuesday showed that mortgage approvals for house prices rose to a five-month high of 66,281 in July.