The U.K.’s housing market showed strong growth, while other parts of the economy struggled to recover from the coronavirus disruption
U.K. house prices posted their biggest annual gain since 2016 in September as a tax cut fuelled a post-lockdown demand to move.
Values climbed 5% from a year earlier to an average of 226,129 pounds, Nationwide Building Society said Wednesday. The report comes a day after Bank of England data showed mortgage approvals have hit a 13-year high.
The strong housing market contrasts with other parts of the economy, which are still struggling to recover from the coronavirus disruption as the U.K. government reimposes some restrictions on movement and leisure.
On Wednesday, the Recruitment and Employment Confederation found private-sector confidence subdued and many firms reducing pay. Lloyds Bank said its measure of business sentiment improved in September but remained well below the long-term average.
There was also a warning for Chancellor of the Exchequer Rishi Sunak about a surge in insolvencies unless the government extends measures designed to shield firms struggling amid the virus crisis.
The Institute of Directors made its plea on the day that the suspension of wrongful trading rules is due to come to an end. That emergency decision protected firms that may be facing a short-term hit from the virus from being forced to file for bankruptcy.
The relative outperformance of the housing market is in large part due to a government decision to suspend a tax on home purchases until the end of March as part of its stimulus package for the economy. Many analysts say the property boom will probably fade after a few months as unemployment rises and aid packages come to an end.
For now, real estate is benefiting from pent-up demand following the lockdown, as well as a desire for bigger properties as people work from home more regularly.
Housing market activity has recovered strongly, said Robert Gardner, Nationwide’s chief economist. The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs.
