House price growth up 3.7% pre-pandemic

Annual house price growth rose by 3.7% in April, according to Nationwide’s latest house price index, the highest rate of annual growth for more than two years.

According to the April index, there have been month-on-month gains for seven consecutive months, but these figures do not reflect the impact of the coronavirus pandemic on property prices. This is because the index is based on mortgage approvals data, and there are usually a few weeks between mortgage applications being submitted and when they are approved by lenders.

The building society said that around four out of five of the cases used in its April index related to mortgage applications that had been made prior to lockdown measures being introduced.

Now that the property market has ground to a halt and the government has advised all but the most essential moves should be put on hold, this is likely to make it difficult for Nationwide, along with other providers of house price index data, such as Halifax and Rightmove, to calculate average house prices. House price indices that are published next month will have to be based on a fraction of the levels of approvals usually recorded.

Outlook for the property market

Although the pandemic means that the UK’s economic future is highly uncertain, Nationwide said the measures that the government has introduced to shore up the economy may help limit the impact on the housing market and encourage a strong recovery.

Robert Gardner, Nationwide’s chief economist said: “Economic activity is set to contract significantly in the near term as a direct result of the necessary measures adopted to suppress the spread of the virus.

“But the raft of policies adopted to support the economy, including to protect businesses and jobs, to support peoples’ incomes and keep borrowing costs down, should set the stage for a rebound once the shock passes, and help limit long-term damage to the economy.

“These same measures should also help ensure the impact on the housing market will ultimately be much less than would normally be associated with an economic shock of this magnitude.”