What does the UK’s recent property upswing tell us?

Posted by Luke Graham

Earlier this month, statistics from the UK’s Nationwide Building Society were discussed in The Guardian. Figures from August indicate the UK has reached an all-time high average house price of £224,123, which follows four months of weaker prices. This has been attributed to pent up demand during an extended lockdown period, as well as government stimulus such as the stamp duty holiday. The last time Nationwide’s average house price increased by this much in a month, a Harvard undergraduate by the name of Mark Zuckerberg was launching a social networking site from his dorm room called TheFacebook (February 2004).

Similar to Australia, the UK has seen a broad range of housing market predictions since the pandemic began. Many of them have had to be revised once new insights arise regarding the virus or new interventions arise from the government. The UK Government’s interventions to protect home values is proof that Australia is not alone in its dependence on a vibrant property market. This particularly applies to middle-income households which represent the largest demographic group of both nations.

Later today, the next version of the ABS Residential Property Price Index will be released, which will tell us how median house prices performed in our capital cities (and rest of state) over the second quarter of 2020. Q2 2020 is an interesting period, as it began at the back end of the first spike in COVID cases, steady recovery of the share market, and steady recovery in consumer confidence. It also ended before the second spike, which was largely confined to Victoria anyway. For this reason, more immediately available data such as the CoreLogic Home Property Value Index will be more useful. This resource shows that Melbourne had the country’s worst performance in August, but that prices are still remarkably higher than they were 12 months ago. Now that Melbourne has passed their COVID spike, we can expect things to warm back up in that market as they did in the UK.