Average house prices dip following end of Stamp Duty holiday

/ Isla MacFarlane
Average house prices dip following end of Stamp Duty holiday

According to the latest government data, house prices cooled following the end of the Stamp Duty holiday; however, the fundamentals of the housing market remain strong, and the outlook is healthy.

The data shows:

  • Average house prices in the UK increased by 8.0% in the year to July 2021, down from 13.1% in June 2021.
  • At the country level, the largest annual house price growth in the year to July 2021 was recorded in Scotland, where house prices increased by 14.6%.
  • Wales saw house prices increase by 11.6% in the year to July 2021.
  • England saw house prices increase by 7.0% in the year to July 2021.
  • Northern Ireland saw house prices increase by 9.0% over the year to Quarter 2 (April to June) 2021.

John Eastgate, Managing Director of Property Finance at Shawbrook Bank, said: “House price strength is set to continue despite the ending of the Stamp Duty holiday. The dramatic shortage of supply looks set to persist and the economic backdrop will underpin valuations. The difference this time of course is that, if anything, London price rises are behind many other parts of the country, as buying habits change and buyers’ priorities shift towards quality of life rather than quality of commute.  London prices will come back strongly however as we see a return to normality.

“Mortgage rates are more attractive than ever, however accelerating house prices will do nothing to ease affordability challenges and we should expect to see continued growth of the Private Rental Sector, which plays an essential role in the housing landscape.”

UK house prices increased by 8.0% in the year to July 2021, down from 13.1% in June 2021. On a non-seasonally adjusted basis, average house prices in the UK decreased by 3.7% between June and July 2021, compared with an increase of 0.8% during the same period a year earlier (June and July 2020).

House price growth was strongest in the North East where prices increased by 10.8% in the year to July 2021. The lowest annual growth was in London, where prices increased by 2.2% in the year to July 2021.

The Royal Institution of Chartered Surveyors’ (RICS) July 2021 UK Residential Market Survey reported a much softer month for new activity in the housing market, due to the start of the phasing out of the Stamp Duty holiday from the end of June.

The Bank of England’s Agents summary of business conditions 2021 Q2 reported ongoing strong demand for housing across most of the UK and a shortage of properties for sale, which pushed up prices.

The UK Property Transactions Statistics showed that in July 2021, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 73,740. This is 4.2% higher than a year ago. Between June and July 2021, UK transactions decreased by 62.8% on a seasonally adjusted basis, following a record level of transaction numbers in June 2021.

The Bank of England’s Money and Credit July 2021 release reported that mortgage approvals for house purchases (an indicator of future lending) in July 2021 was 75,200, which is down from 80,300 in June 2021.

Joshua Elash, director of property lender MT Finance, said: “The approaching end of the stamp duty holiday brought about a feeding frenzy in June, which was always going to be followed by a lacklustre July as the market drew breath.

“Although dramatic, the decrease in transactional activity from June by a whopping 62.8 per cent is a temporary dip and we expect an immediate bounce back both in terms of transactional volume and house-price growth.

“The fundamentals remain strong with demand continuing to outstrip supply. With reported labour shortages and disruptions to the supply chain threatening to impact the rate at which new housing will be brought to market, exacerbated by inflationary pressure, we expect house-price growth to gather serious momentum as we head into the final quarter of the year.”

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