- Halifax’s measure of house prices joined its Nationwide counterpart in showing another rise in house prices in August. An increase of 0.7% month-on-month (m/m) lifted the average house price to £262,954, the highest on record. Buyers seeking to benefit before the stamp duty threshold returns to its normal level of £125,000 from October may have supported demand and prices.
- The end of the stamp duty holiday on 30 September may see demand for properties soften and a modest correction in prices. But the economic consequences of the pandemic, including increased demand for larger properties in a world of more home working and a rise in households’ savings, may keep house prices persistently higher than otherwise. Any significant fall in prices seems unlikely for the foreseeable future.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“Following a strong 2.1% month-on-month increase in Nationwide’s measure of house prices in August, Halifax’s gauge followed suit, albeit in a less heated manner, rising 0.7% in the same month. This exceeded the average monthly increase in the Halifax measure of 0.6% month-on-month over the 12 months to August and lifted the average house price to £262,954, the highest on record. However, annual growth slowed to a five-month low of 7.1% from 7.6% in July.
“Although the temporary stamp duty holiday introduced last year was decreased on 30 June, the nil-rate threshold will not return to the original £125,000 level until 1 October. So buyers lining up transactions and seeking to benefit from a lower tax bill before the October deadline may have supported demand and prices in August.
“Other factors also played a role in August’s rise in prices, and these are likely to persist for the foreseeable future. Consumer confidence has remined high, the labour market is emerging from the crisis relatively unscathed and buyers have continued to benefit from ultra-low mortgage rates. Meanwhile, the pandemic has had what will likely be long-lasting effects on property preferences, including raising demand for larger homes in a world of more home working. Combined with the fuel for property deposits provided by the substantial savings accumulated by some households during lockdowns, there are plenty of props supporting the housing market.
“That said, forces affecting the housing market are not all positive. On measures such as the ratio of house prices to household incomes, affordability looks increasingly stretched. And despite a recovering economy, higher inflation, the prospect of some increase in unemployment when the furlough scheme ends and the reversal of other supports to household incomes will weigh on households’ finances. But elevated house prices are unlikely to see any significant fall for the foreseeable future.”