Press release

30 Sep 2021 London, GB

House prices continued to rise, if modestly, in September – EY ITEM Club comments

House prices continued to rise

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Related topics Growth COVID-19
  • The latest numbers from Nationwide showed house prices continuing to grow in September, albeit by only by 0.1% month-on-month (m/m). Annual growth slowed to a still strong 10% from 11% in August. Prices have likely continued to be supported by the stamp duty holiday, which was pared back in June, but continued to offer tax savings to buyers.  
  • Stamp duty reverting to its pre-pandemic level on 1 October will reveal just how important the tax cut has been in supporting house prices. With the end of the tax holiday and house price affordability measures looking increasingly stretched, a correction in house prices is possible in the not-too-distant future. 
  • But the continuation of other factors propping up house prices, such as the ‘race for space’ and high household savings, suggests any fall in prices, if it occurs, will be modest.    

Martin Beck, senior economic advisor to the EY ITEM Club, says: 

“The latest numbers from Nationwide showed house price growth decelerating significantly to 0.1% month-on-month in September from 2% the previous month. But this still left annual growth in double-digits and average prices around 13% higher than their level at the start of the pandemic. 

“House prices have likely continued to be influenced by the stamp duty holiday. This was pared back in June but continued to offer buyers a tax saving compared with the pre-pandemic position during September. With the stamp duty threshold set to revert to its normal level of £125,000 from 1 October, the EY ITEM Club expects demand for properties and price growth to soften as a result.

“But by how much is still unclear. The return of stamp duty to its original level will provide a better idea of the importance of other post-COVID-19 drivers of housing demand and house prices, including the ‘race for space’, increased use of the home as a workplace, high levels of household savings and lower mortgage rates. Some of these factors may start to fade. For example, the recent hawkish tone from the Bank of England around interest rates has already been reflected in a rise in long-term market interest rates, a development which could, over time, feed into higher mortgage costs. But other supports may prove long-lasting and should continue to buttress house prices for some time to come. So while the strong and sustained house price growth seen over most of the past year or so is unlikely to persist, any serious correction in values looks unlikely.”