Average House Prices Increase at Fastest Rate Since 2004
The phasing out of tax incentives offered in the form of a temporary stamp duty holiday was predicted to lead to a notable decline in housing demand toward the end of June. According to the latest figures from Nationwide, last month’s housing market performance exceeded all realistic expectations.
Average UK house prices were up an astonishing 13.4% in the year to June; the fastest growth recorded in almost 17 years. The average price of a UK home now stands at £245,432 which is a massive leap from the £216,403 average in June 2020.
Commenting on the figures, Nationwide chief economist Robert Gardner highlighted how skyrocketing property prices are making it increasingly difficult for first-time buyers to get anywhere near the property ladder.
He also spoke of how the pandemic unexpectedly stimulated the housing market, driving demand for more spacious properties away from the usual busy urban centers.
“The pandemic is an unusual kind of shock – it has stimulated housing market activity rather than the shock holding back the market which is normally what happens,” he said.
Growth Across All Regions
The second quarter of the year saw house prices increase across all regions of the UK, with Wales and Northern Ireland having seen the most rapid growth at 13.1% and 14% respectively. Nationwide pointed out that while property prices are hovering around all-time highs, the average mortgage repayment remains relatively low due to exceptionally competitive interest rates.
But what remains uncertain is whether the unprecedented boom the sector is seeing right now will ultimately lead to a bust. The withdrawal of stamp duty incentives at the end of June was widely predicted to result in a gradual reduction in demand among first-time buyers in particular.
Fine and Country estate agents, managing director Nicky Stevenson expressed his surprise at how the tail-end of the government’s stamp duty holiday does not appear to be quelling demand.
“Annual house price growth of this magnitude is something no one thought they’d see, particularly with the stamp duty holiday now tapering out,” he said.
“The final closure of the stamp duty scheme at the end of September may have no impact at all because other factors are so much more important, namely the race for space, low supply, accidental savings and low interest rates.”
AJ Bell financial analyst, Danni Hewson, highlighted the increasingly important connection between unemployment and housing demand going forwards.
“How many people will still be in a job once the furlough scheme ends? How many mortgage holidays will result in quick sales? There is no getting away from the fact that the next few months will be difficult for many people once support is withdrawn,” she said.