As UK government ministers recently decided on a national lockdown in response to the dramatically rising numbers of COVID infections, many wonder if the early autumn boom in the property market will continue after the lockdown.

UK house prices reported their largest annual increase since 2015 in October. Meanwhile, in September, British lenders approved the highest number of mortgages since September 2007. The revival in the housing market continues to defy a general economic downturn in the continuing pandemic.

UK House Prices on the Rise

The Nationwide Building Society reported on Friday that house prices increased 5.8% from a year earlier to an average of £227,825. This meant a quarterly gain of 3.5%, the biggest increase since 2009, and a 0.8% gain in just October alone.

The UK government’s decision to suspend a tax on home purchases and many people’s desire to move out of the cities are understood to be the main reasons for the increases.

Robert Gardner, Nationwide’s chief economist said:

“The outlook remains highly uncertain and will depend heavily on how the pandemic and the measures to contain it evolve.”

“Activity is likely to slow in the coming quarters, perhaps sharply.”

Earlier in the month, the Halifax house price index posted a 7.3% increase in September, the steepest annual increase since June 2016.

UK Mortgage Approvals Soar

The strong UK Housing data came just a day after surprisingly strong UK mortgage data. Bank of England data showed in late October that UK mortgage approvals hit a 13-year high.

Mortgage approvals for house purchases leapt to 91,454 in September from August’s unexpectedly high reading of 85,530 as the house buyers took advantage of the suspended stamp duty.

Despite the unexpectedly strong but welcome mortgage and housing data, there are growing concerns over its sustainability as the economic effect of the pandemic will continue to be felt.

Andrew Montlake, managing director of mortgage broker Coreco, said:

“The post-lockdown bull run is already over.”

“Lenders have been pulling down the shutters due to ongoing struggles with capacity and concerns over rising unemployment levels, specifically the impact on house price growth.”

With the renewed lockdown, will the housing marketing market be badly hit?

Silver Linings During Lockdown?

The prevailing assumption may be the lockdown is necessarily a negative for the property market, but some in the industry see a reason to be optimistic. Some feel that the boom in the UK housing market was due in part to pent-up demand during the lockdown.

Under government guidelines, estate agents may remain open and property viewings are still permitted during the lockdown. In fact, with people home from their offices, they may take advantage of the time they have to view properties and make buying decisions.

Richard Donnell, head of research and insights at Zoopla, commented, “We’ve already seen how lockdown led to people carrying out a once-in-a-lifetime re-evaluation of their homes and lifestyles, with a focus on prioritising space. And the latest restrictions will continue to support this trend – particularly for those who are more financially secure.”

The Impact of Unemployment

Even if the direct effect of the second lockdown may not be as disastrous as expected, there is still a note of caution following the exuberant housing numbers in the last few months.

One of the reasons for the boom was that the true effect of rising unemployment had not yet impacted the property market, but Nationwide cautioned that the future of the UK property market looked “highly uncertain” and added that that housing activity will slow in the next few months as unemployment numbers increase and the effect of these numbers are expressed in slower sales.