House prices continue to boom in the UK as the stamp duty holiday draws to a close.

The latest Nationwide building society report shows average prices rising at their fastest pace since the end of 2004, with growth reported in all regions. According to Nationwide, the average house price rose 0.7% between May and June, with an annual growth rate of 13.4%, up from 10.9% a month earlier. House price growth is supported by an extension to the stamp duty holiday, now coming to an end, and changing property preferences for more indoor and outdoor space.

Robert Gardner, the chief economist at Nationwide, said:

“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, after taking account of seasonal effects. Prices in June were almost 5% higher than in March.”

 

The strongest property price gains were reported in Northern Ireland and Wales, at 14% and 13.4% annual growth. The weakest growth was seen in Scotland, at 7.1%, with London close behind at 7.3%. Another factor supporting rising house prices is low interest rates, with mortgage rates close to their all-time lows due to the Bank of England rate at a historic low of 0.1%. However, first-time buyers continue to struggle to get onto the property ladder. Gardner commented that because property prices are “close to a record high” relative to average earnings, it is “even harder” for first-time buyers. It’s hard to predict what might happen next for the housing market.

The gradual withdrawal of the stamp duty holiday in England, Northern Ireland and Wales, returning to pre-pandemic rates in October, is likely to remove this incentive for buyers.Economists have also expressed fears about rising unemployment levels when the furlough scheme is withdrawn. However, the experience of the pandemic and a sustained shift to working from home or hybrid working could continue to support prices, as buyers look for more rural locations offering a better quality of life and more space

About the author

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Traded the markets for over 15 years, including Commodities, Bonds, Currencies, Equities, and Indices. I have also worked as a Chartered Financial Planner.
CeMAP, CeFA, DipFA, AdvDipFA, Ba(Hons) Economics, Chartered ALIBF

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