House prices jump 10.9% as 'race for space' intensifies

UK house prices soared 10.9% in the year to May, the highest level in seven years, according to the Nationwide.

The average house price has risen to £242,832, up £23,930 over the past twelve months.

Buyers are in a "race for space" as they seek larger homes and properties with gardens, Nationwide said.

Bank of England deputy Sir Jon Cunliffe told the BBC it was important people did not overstretch themselves in terms of mortgage borrowing.

Robert Gardner, Nationwide's chief economist, said the housing market has seen a complete turnaround over the past twelve months.

A year ago, activity collapsed in the wake of the first lockdown with housing transactions falling to a record low of 42,000 in April 2020, he said.

"But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March," Mr Gardner said.

According to the building society's research, there's "a race for space" with people moving to access a garden or outdoor space more easily.

"The majority of people are looking to move to less urban areas," Mr Gardner said.

He added that the extension of the stamp duty holiday from its original end date of March helped to maintain momentum in the market.

"It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic," he said.

Talking to the BBC, Sir Jon Cunliffe said the way people had learned to work differently during the pandemic may also be changing their preferences for where they want to live.

He said the Bank's main concern was rising personal debt.

"We learned from experience that if households are carrying high levels of debt, and you then hit a bump, the recession is much worse. We learned that 10 years ago after the financial crisis," he said.

Tax breaks introduced during the pandemic to boost the housing market and, in turn the UK economy, had a marked effect in the last 12 months.

The property purchase tax was suspended on the first £500,000 of all sales in England and Northern Ireland from July to support the market.

Similar support for homebuyers was introduced in Scotland and Wales.

The tax relief was due to end across the whole of the UK at the end of March, prompting a surge in sales to beat the planned cut-off date, but only Scotland stuck to the deadline.

England, Northern Ireland and Wales extended relief to the end of June.

After that in England and Northern Ireland, the nil rate band will be set at £250,000 - double its standard £125,000 level - until the end of September.