The UK housing market went berserk the moment the first lockdown ended in the UK © EyeEm/Getty

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I did not expect a house price boom in 2020. I did not expect it in January when we were all fretting over Brexit. I did not expect it when I first heard about the new coronavirus moving from savaging Wuhan to ripping through Europe’s ski resorts. And I certainly did not expect it when the UK shifted into lockdown in March.

I even remember exchanging messages with a colleague in which we sadly noted that the coming recession would be the final trigger to an inevitable house price crash. 

However, I had missed two key things, both of which were tough to imagine in March. The first was the lengths that governments would go to replace incomes and “build a bridge” across the carnage created by their Covid-19 prevention policies. In 2008, the UK spent 1.5 per cent of gross domestic product to alleviate the global financial crisis; this time we have spent 26 per cent of GDP.

The second point was just how much being locked up would make people want to move house. 

The combination of these two drivers created something pretty rare in modern economics — pent-up demand in the form of a large group of better-off people who wanted something really badly and could realise their dreams thanks to steady incomes, undamaged investment portfolios, sharply lower living expenses and the confidence inspired by government support programmes.

The result? The UK housing market went berserk the moment our first lockdown ended: sales volumes and prices rose together in the middle of a recession “for the first time in modern history”, says Savills.

By October, mortgage approvals had hit a 13-year high. In November, a total of 124,800 transactions completed — 18,000 more than the five-year average for the month. Between June and December, the average house price jumped by more than £13,000, ending the year up 7.3 per cent on Nationwide numbers. 

Those in any doubt about the energy in the bounce need only look to the UK’s housebuilders: Persimmon has, for example, started this year with a £1.2bn cash pile (sales rose 39 per cent in the second half of 2020) and a record order book.

It is easy to see now how this all made sense last year. After all, nothing makes you reassess how much you like your house than being imprisoned in it. Add in the revelation that working from home is possible for quite a lot of us; the understanding among parents that home education in limited space is hell; and the rising fear that governments now consider lockdown to be part of their public health “toolbox” and it is no wonder that space is commanding a new premium.

Look at a map of where transactions have taken place over the past year and you will not be surprised to see outer London more popular than inner London, while the north of England and the south-west are an awful lot more popular than anywhere at all in London. My mother, who has been looking for a Wiltshire cottage for a year, tells me they are gold dust. Far from the madding — and infectious — crowd.

But does the Covid house price boom still make sense this year? At some point what chancellor Rishi Sunak has given, he will take away. The stamp duty holiday, which helps sentiment rather than affordability, will end. Furlough will end. Unemployment will rise. The ban on repossessions will end, allowing exasperated landlords to sell. 

And it may well be that as the vaccine rollout kicks in and life goes back to normal, those of us who have not yet moved remember the things we like about the location of our houses.

Research from flatshare site Spareroom shows that 27 per cent of London renters say they will move post pandemic. Almost half of these say they quit the capital. I bet they do not. Rural Northumberland is not for everyone. Finally, think public finances: there is much talk of wealth taxes — something that in the UK usually means property taxes. New buyers calculating cash flow need to take that into account as do buy-to-let investors: a rise in capital gains tax is very possible.

Either way, the frenzy is slowing. The latest Royal Institution of Chartered Surveyors survey saw the number of sales per surveyor hit a four-year high — but with a much smaller monthly increase than seen since the frenzy began in May. 

New buyer inquiries are rising more slowly too; a growing majority of surveyors say they expect sales numbers to fall over the next three months; we are starting to see some price cuts from those who were a little overzealous at the end of last year; and the ratio of sales to unsold stock fell last month for the first time since April.

Peak get-me-out-of-here momentum may have passed. However, a lull is inevitable — and most analysts forecast small falls in prices this year. Pantheon Macroeconomics is expecting a 2 per cent fall and Capital Economics 5 per cent.

But I am not sure this should make you bearish on property prices over the medium term.

Why? Inflation. It’s been hard to measure recently given the changes in our purchasing patterns during the rolling lockdowns. But the speed at which money supply is rising in developed economies is breathtaking. You can see it in financial asset prices. Metal, grain gold and bitcoin prices are also rising.

When demand soars across the board after the lockdowns end, it is hard to imagine that there will not be sharp price hikes across the service sector. The holiday plans of my extended family alone might use up all available seats on easyJet flights.

Property is not a perfect hedge for inflation but it does have a long-term record of delivering real returns — and if interest rates remain lower than inflation, which they should, mortgage holders could find themselves enjoying an unusual mix of low payments and — in real terms at least — a shrinking debt load.

This is not a call for you to go out and build a buy-to-let portfolio. There is probably better inflation protection in gold and dividend-paying value stocks. But it does give reason to think that the UK’s long-awaited house price crash is going to be delayed for some time. Again.

The article was amended after publication to correct the percentage of London renters planning to leave the capital, as recorded in the Spareroom survey.

Merryn Somerset Webb is editor-in-chief of MoneyWeek. Views are personal. merryn@ft.com. Twitter: @MerrynSW

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