Values are now around 13% higher than before the pandemic.
Prices grew 2.1% month-on-month, after taking account of seasonal effects, the second largest monthly gain in 15 years.
According to Robert Gardner, chief economist at Nationwide, this may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, despite maximum savings being substantially lower than before the tapering.
Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books.
The research also shows that energy efficiency only has a modest influence on house prices for owner occupiers, where an impact is only really evident for the best and worst energy efficiency ratings.
However, Robert believes that the value that people attach to energy efficiency will likely change over time, especially if the government takes measures to incentivise greater energy efficiency in future to help ensure the UK meets its climate change obligations.
“Underlying demand is likely to remain solid in the near term,” he said.
“But, as we look towards the end of the year, the outlook is harder to foresee.
“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 — but even this is far from assured.
“The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”
Property industry split
Jonathan Hopper, CEO at Garrington Property Finders, commented: “July’s slowdown in price growth was a speed bump, not a stop sign; the market put its foot firmly back on the gas in August, with the price rises accelerating sharply.
“England’s stamp duty holiday officially ends at the end of September, but with the savings it offers now pretty modest, the property market is being driven by the old-fashioned dynamics of demand and supply.
“As in so many other industries, a constrained supply chain is holding back the number of homes coming onto market and this is fanning the flames of price growth.
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“While no one expects the double-digit pace of annual price growth to last, the ongoing imbalance between supply and demand, combined with cheap mortgages that are helping buyers absorb some of the rising costs, means market conditions are unlikely to change dramatically any time soon.”
George Franks, co-founder of Radstock Property, added: "The exceptional rate of house price growth in August underlines how the market is being driven by the desire for a new way of life, not fiscal savings.
“People want and are increasingly being allowed to work from home more, and that is redefining the property market and powering it onwards.
“That said, August is always an anomaly due to low volumes, so we should take the 2.1% growth with a pinch of salt; September and October will tell us what's really going to happen to the market in the short- to medium-term, although the fundamentals, for now at least, are good.”
When it comes to the market prospects for the remaining year, opinions are split, with some experts, such as Robert Payne, co-founder of Langley House Mortgages, claiming that property demand and house prices will remain high.
“With rates as low as they are and lenders showing a willingness to lend, it’s a recipe for continued high levels of activity in the market, and I suspect this will be the case for the rest of the year,” he stated.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, shared a similar view, adding that the confirmation of post-furlough working arrangements is contributing to a release in more pent-up demand, which is likely to continue until the end of the year at least.
James Forrester, managing director at StripeHomes, commented: “The largest monthly gain in 15 years tells you all you need to know about the current health of the UK property market, and it’s now abundantly clear that the tapered end of the stamp duty holiday isn’t going to be the significant event that many predicted in terms of its impact on property values.
“While it certainly spurred a revival in homebuyer demand, this increased intent to purchase has been driven by a desire to own our own homes, not to save a few thousand pounds.”
However, other experts, including Jason Tebb, CEO at OnTheMarket.com, believe activity will level out.
“It's a simple fact that this is the best market in which to sell a property in over two decades; sellers really have never had it so good, with buyer demand fuelled by access to record low mortgage rates and the ongoing ‘race for space’,” highlighted Jason.
“Anyone considering selling would be best advised to take action now, as these conditions certainly aren’t the ‘new normal’ and, as with any market cycle, activity will plateau at some point in the next few months.”
Guy Harrington, CEO at Glenhawk, added: “These are jaw dropping levels of price growth, given the high volume of sales eating into an already undersupplied market and numerous dark macroeconomic clouds.
“However, the pandemic-induced race for space is only going to slow as the return to the office gathers pace and house prices won’t be going up as steeply as the north face of Everest for much longer.
“Reality will creep back in by the end of the year, as demand softens and prices plateau.”