Friday, July 30

Annual house price growth in the UK reached 13.4% in June, the highest since 2004 Business

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UK house price inflation has reached its highest level since 2004, in the latest scramble to take advantage of the full stamp tax holiday.

Mortgage lender Nationwide reports this morning that annual home price growth hit 13.4% this month, the highest level since November 2004.

Monthly, prices rose by 0.7% during June, raising the average price to £ 245,432 on the Nationwide index.

That’s a slowdown from May’s 1.7% increase, but it still means annual price inflation is the highest in more than 16 years.

Home price index nationwide

House price index at the national level Photograph: At the national level

That partly reflects the weakness of the market a year ago, during the first wave of Covid-19. But it also reflects the rush to buy as the end of the stamp duty holiday approaches (the threshold is halved to £ 250,000 on July 1 in England and Northern Ireland, while Wales ends tax exemption on purchases up to £ 250,000).

Robert gardner, Nationwide’s chief economist, explains:

While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum.

In fact, June registered the third consecutive month-on-month rise (0.7%), after taking into account seasonal effects. Prices in June were almost 5% higher than in March.

UK House Price Index

UK House Price Index Photo: Nationwide

But Gardner also warns that the prospects for the housing market are more difficult to assess, once the stamp tax exemption ends

“The underlying demand is likely to remain strong in the short term as the economy unlocks. Consumer confidence has recovered, while borrowing costs remain low. This, combined with the lack of supply in the market, suggests greater upward pressure on prices. But if we look towards the end of the year, the outlook is more difficult to predict.

“Activity will almost inevitably soften for a period after the stamp duty holiday expires in late September, given the strong incentive for people to advance their purchases to avoid the additional tax.

However, underlying demand is likely to weaken towards the turn of the year if unemployment rises, as most analysts expect, as government support schemes decline. But even this is far from assured. Even if the labor market weakens, there is also scope for changes in housing preferences as a result of the pandemic to continue to support activity for some time.

The Nationwide report also shows that all parts of the UK experienced an acceleration in annual house price growth in the last quarter.

North Ireland Y Welsh posted the highest gains, with 14% and 13.4%, respectively, in the second quarter. Conversely Scotland recorded the weakest annual growth rate, at 7.1%, closely followed by London 7.3%.

House prices in the UK region, Q2 2021

House prices in the UK region, Q2 2021 Photo: Nationwide

Gardner notes that the Scottish government ended its stamp holiday at the end of March, which means the market may have cooled off.

“Northern Ireland was the best performing region, with prices rising 14% year-on-year, the highest growth rate since 2007. Wales also saw a significant acceleration in annual house price growth to 13.4% , the largest increase since 2005.

But conditions were more moderate in Scotland, which saw a modest increase in annual growth to 7.1% (from 6.9% last quarter) and was also the weakest performing part of the UK. This may reflect that the Stamp Duty (LBTT) holiday in Scotland ended on March 31st.

Reaction to follow …

The agenda

  • Today: SMMT celebrates its International Automotive Summit 2021
  • 9.30 a.m. M. BST: UK Mortgage Approvals and Consumer Credit Figures for May
  • 10 am BST: BEIS Committee hearing on the financial relations of GFG Alliance and Liberty Steel
  • 10:00 am BST: Eurozone consumer and business confidence figures for June
  • 2pm BST: US House Price Figures for April
  • 2.40 p.m. BST: ECB President Christine Lagarde speaks at the 2021 Brussels Economic Forum

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