UK House Prices Picked Up in July, May Drop in Late Autumn

UK house prices grew 1.7 percent in July compared to June as activity bounced back, according to figures released by the Nationwide Building Society on Friday.

House prices may, however, fall again as labor conditions worsen later in the year, experts warn.

Julys monthly gain, after seasonal adjustments, recovered the ground lost in June when housing prices dropped 1.6 percent. Overall, the annual growth rate stands at 1.5 percent (pdf).

“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions,” Robert Gardner, Nationwides chief economist, said in a statement.

Pent-up demand is coming through. Nationwides earlier research found that some people began to reassess their housing needs and preferences during lockdown. Around 15 percent of people surveyed in May (pdf) were considering moving as a result of life in lockdown.

The UK was under strict lockdown for three months from late March to June to try to prevent the spread of the CCP (Chinese Communist Party) virus before a multi-phased easing began in England from early July.

Stamp Duty Holiday

The UK government temporarily reduced Stamp Duty Land Tax on residential property purchases from July 8 until March 13, 2021, inclusive. Buyers only start to pay stamp duty on the amount above £500,000. This relief applies not just to first-time buyers, but also to all home movers.

The nine-month stamp duty holiday provides the greatest savings for those in London and South England where average house prices are significantly higher, Nationwides research found.

It is estimated around 90 percent of owner-occupier transactions in England will pay no stamp duty under this holiday scheme. The stamp duty holiday is expected to provide further support to the housing market in the near term, Gardner said.

Estate agents are seeing an increase in interest from buyers.

For example, David Hill, director of sales for March & Parsons in Chiswick, West London, told prospective customers in a recent letter that new buyer registrations in June were up 36 percent compared to June 2019, something he attributed to the temporary reduction in stamp duty.

Hill also said that it was looking to be a busy summer, with full asking prices being achieved and properties now moving faster on the market.

Axe Waiting to Fall

However, with the government-sponsored furlough scheme coming to an end in October, labor market conditions are expected to weaken and will dampen housing market activity for a time again, Gardner warned.

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