Average house prices in the UK increased by 10.6% in the year to August 2021, up from 8.5% in July 2021, according to the latest government data.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Although these figures are a little dated, they demonstrate once again the resilience of the market, which was still rocking and rolling in August even though buyers at that time would have been unable to take advantage of the stamp duty tax break. Continuing shortage of stock, low interest rates, unexpected savings and government support schemes are underpinning buying and selling activity.
“However, since August the market has calmed a little with more balance between supply and demand. Stock levels are still not increasing fast enough whereas worries about inflation and high interest rates are starting to have an impact.”
The largest annual house price growth was recorded in Scotland, where house prices shot up by 16.9%. Wales saw house prices increase by 12.5% in the year to August 2021, while England saw house prices increase by 9.8% in the year to August 2021. Northern Ireland saw house prices increase by 9.0% over the year to Quarter 2 (April to June) 2021.
House price growth was strongest in the North East where prices increased by 13.3% in the year to August 2021. The lowest annual growth was in London, where prices increased by 7.5% in the year to August 2021.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “House price growth picked up again in August and particularly in the North East, suggesting there is still plenty of steam left in the market.
“But will an interest rate rise slow things down? Although inflation has slowed against all odds, inflationary pressures remain which are pointing towards an interest rate rise at some point. Whether the inflation spike is transitory or structural is at the root of the debate although the Bank of England seems to be hinting at an increase.
“The markets have already priced in a rate rise, and maybe two or three by the end of 2022, and lenders have been swift to increase their cheapest fixed-rate mortgages. Nationwide, Barclays, NatWest, Halifax and Platform have all reacted in the past couple of weeks by raising rates, and we expect others to follow suit. While pricing is edging upwards, mortgages remain historically cheap.”
On a non-seasonally adjusted basis, average house prices in the UK increased by 2.9% between July and August 2021, compared with an increase of 1.0% during the same period a year earlier (July and August 2020).
Andy Sommerville, Director at Search Acumen, said: “These latest figures demonstrate how the supply-demand imbalance is continuing to drive up housing prices, albeit at a slower rate compared to price influxes in June 2021 due to an element of demand-side normalisation as the end of the Stamp Duty holiday loomed.
“While usually August is a slower month in the property market, nothing about recent months has been “normal” and house prices remain elevated. The low levels of housing stock combined with a sustained level of buyer demand suggest we will see an Autumn bounce in prices and seller activity that will extend into the Winter. Particularly as the commuter belt widens and work-life balance takes precedent over the train timetable, we are seeing buyers continue to look for new properties which allow for better standards of living.
“As the market continues to run hot despite the ending of stamp duty incentives, we eagerly anticipate the outputs of next week’s Budget. Given the benefits we have seen during the pandemic of an increasingly digitised property market, including improved efficiency and increased resilience, we would expect that a digital first approach would be front of mind. Public sector support combined with private property firms that can accelerate technological adoption is crucial if we are to future proof the property market.”
The Royal Institution of Chartered Surveyors’ (RICS) August 2021 UK Residential Market Survey reported buyer demand had steadied in the housing market, after there was a softening in sales in the previous month. House price growth decelerated but is reported to remain firm across the UK.
The Bank of England’s Agents summary of business conditions 2021 Q3 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 August 2021, on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 98,300. This is 20.9% higher than a year ago. Between July and August 2021, UK transactions increased by 32.0% on a seasonally adjusted basis, following a record level of transaction numbers in June 2021, and the subsequent reduction which followed in July.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “House price growth picked up again in August and particularly in the North East, suggesting there is still plenty of steam left in the market.
“But will an interest rate rise slow things down? Although inflation has slowed against all odds, inflationary pressures remain which are pointing towards an interest rate rise at some point. Whether the inflation spike is transitory or structural is at the root of the debate although the Bank of England seems to be hinting at an increase.
“The markets have already priced in a rate rise, and maybe two or three by the end of 2022, and lenders have been swift to increase their cheapest fixed-rate mortgages. Nationwide, Barclays, NatWest, Halifax and Platform have all reacted in the past couple of weeks by raising rates, and we expect others to follow suit. While pricing is edging upwards, mortgages remain historically cheap.”
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