UK annual house price growth hits 13.4% in June, highest since 2004 – business live

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UK house price inflation has hit its highest level since 2004, in the last scramble to take advantage of the full stamp duty holiday.

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

On a monthly basis, prices rose by 0.7% during June, lifting the average price to £245,432 on Nationwide’s index.

That’s a slowdown on May’s 1.7% surge, but still means annual price inflation is the highest in over 16 years.

Nationwide house price index

Nationwide house price index Photograph: Nationwide

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 nears (the threshold halves to £250,000 on 1 July in England and Northern Ireland, while in Wales the tax break on purchases up to £250,000 ends).

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.

Indeed, June saw the third consecutive month-on-month rise (0.7%), after taking account of seasonal effects. Prices in June were almost 5% higher than in March.

UK house price index

UK house price index Photograph: Nationwide

But Gardner also warns that the outlook for the housing market is harder to assess, once the stamp duty tax holiday ends

“Underlying demand is likely to remain solid in the near term as the economy unlocks. Consumer confidence has rebounded while borrowing costs remain low. This, combined with a lack of supply on the market, suggests further upward pressure on prices. But as we look toward the end of the year, the outlook is harder to foresee.

“Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the strong incentive for people to bring forward their purchases to avoid the additional tax.

Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down. But even this is far from assured. Even if the labour market does weaken, there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.

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

Northern Ireland and Wales saw the largest gains, at 14% and 13.4% respectively in Q2. By contrast Scotland saw the weakest rate of annual growth, at 7.1% closely followed by London at 7.3%.

UK regional house prices, Q2 2021

UK regional house prices, Q2 2021 Photograph: Nationwide

Gardner points out that the Scottish Government ended its stamp duty holiday at the end of March, meaning the market may have cooled.

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

But conditions were more muted 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 31 March.

“England saw annual house price growth increase to 9.9%, from 6.4% in the first quarter of the year.

Reaction to follow….

The agenda

  • Today: SMMT holds its International Automotive Summit 2021
  • 9.30am BST: UK mortgage approvals and consumer credit figures for May
  • 10am BST: BEIS Committee hearing into the financial relationships of GFG Alliance and Liberty Steel
  • 10am BST: Eurozone consumer and business confidence figures for June
  • 2pm BST: US house price figures for April
  • 2.40pm BST: ECB president Christine Lagarde speaks at the Brussels Economic Forum 2021


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