UK house prices ease for first time this year – Halifax

by | Jul 7, 2021

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UK house prices have dipped for the first time this year, industry data showed on Wednesday, as the stamp duty holiday started to wind down.
According to the latest Halifax House Price Index, the average UK house price eased 0.5% in June, the first monthly decline since January. On an annual basis, house price inflation was ahead 8.8%, although that was down on May’s 14-year high of 9.6%.

The average UK property price is now £260,358.

Russell Galley, managing director of Halifax, said: “With the stamp duty holiday now being phased out, it was predicted that the market might start to lose some steam entering the latter half of the year, and it’s unlikely that those with mortgages approved in the early months of summer expected to benefit from the maximum tax break, given the time needed to complete transactions.”

The UK housing market has rocketed over the last year, fuelled by pent-up demand, homeowners re-evaluating housing needs during the pandemic and, in particular, raising the stamp duty threshold to £500,000.

Introduced by the chancellor last summer, the tax break was originally due to end in March 2021 but will now taper out, reducing to £250,000 in June before reverting to £125,000 in September.

Galley added: “The power of homeowners to drive the market, as people look to find properties with more space, won’t fade entirely as the economy recovers. Coupled with buyers chasing the relatively small number of available properties, and continued low borrowing rates, it’s a trend which can sustain high average prices for some time to come.

“However, we would still expect annual growth to have slowed somewhat by the end of the year, with unemployment expected to edge higher as job support measures unwind.”

Martin Beck, senior economic advisor to the EY Item Club, said: “This was still very strong by past standards – prices grew by an annual average of 4.5% from 2015-2019 – and left average prices £21,000 higher than a year earlier.

“The tapering of the stamp duty concession on 30 June should now provide a clearer view of how important the tax measure was in boosting prices and activity.

“There are several forces which should keep price growth elevated for the time being. A shift to home-working may prove semi-permanent, which would support demand for larger out of town properties and push up prices. Home buyers may also capitalise their savings on commuting costs into property values.

“All-in-all, annual growth in house prices will probably slow as the year progresses. But the odds of a serious correcting in the housing market in the near future looks low.”

James Forrester, managing director of estate agent Barrows and Forrester, said: “The tapered end of the stamp duty holiday will bring about a natural market correction but the proof of the pudding is the annual rate of growth, which sits at nearly 9%.

“The market remains in a very strong position, and while we may see the rate of growth continue to cool, this is a world away from a substantial drop in market values.”

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