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A slight fall in house prices between June and July meant that the annual growth rate dipped to ‘only’ 10.5 per cent last month, the Nationwide has reported.
Reduction in England of the stamp duty threshold from £500,000 to £250,000 at the end of June is likely to have taken some heat out of the market, concluded the mortgage lender.
‘The modest fallback in July was unsurprising given the significant gains recorded in recent months. Indeed, house prices increased by an average of 1.6 per cent a month over the April-to-June period – more than six times the average monthly gain recorded in the five years before the pandemic’, said Nationwide’s chief economist Robert Gardner.
‘The stamp duty changes drove the number of housing market transactions to a record high of almost 200,000 in June as home-buyers rushed to beat the deadline. This was around twice the number of transactions recorded in a typical month before the pandemic and 8 per cent above the previous peak seen in March’.
Meanwhile Nationwide detected a shift in the composition of property types being bought and sold. Over the past six months the proportion of sales involving detached and semi-detached properties has increased, while the proportion involving flats has declined significantly, it said.
‘While tax changes have been important in determining the timing of transactions and the trends noted above, they have not been the main factor prompting people to move in the first place. Amongst homeowners surveyed at the end of April that were either moving home or considering a move, three quarters said this would have been the case even if the stamp duty holiday had not been extended beyond the original March 2021 deadline’, said Gardner.
‘Shifting housing preferences appear to have been the more important factor in driving the increase in housing market activity, with people reassessing their housing needs in the wake of the pandemic. At the end of April, 25 per cent of homeowners surveyed said they were either in the process of moving or considering a move as a result of the pandemic. Given that only around 5 per cent of the housing stock typically changes hands in a given year, it only requires a relatively small proportion of people to follow through on this to have a material impact’.
And anyway, said Nationwide, recent house price increases have far outstripped any possible stamp duty ‘savings’. It concluded that ‘underlying demand is likely to remain solid in the near term. Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with a lack of supply on the market, suggests continued support for house prices. But, as we look toward the end of the year, the outlook is harder to foresee’.
Meanwhile the housing portal Zoopla has reported buyer demand down by 9 per cent in the first half of June – ‘albeit, still 80 per cent above the historic seasonal average. It expects price growth ‘to edge upwards in the coming months’.
‘Pricing is being supported in part by a severe shortage of homes for sale. There has been a 25 per cent fall in the volume of homes for sale in the first half of the year compared to the same period in 2020. Supply has now failed to keep pace with demand since January 2021, with no sign of a rebalance expected to play out imminently’.
At the same time, ‘transaction volumes also show no signs of abating, with sales agreed running 22 per cent ahead of average levels in 2020’.