Russell Galley, Managing Director, Halifax, comments: “House prices rose by 0.4% in July to add £1,122 to the cost of the average property, pulling back some of the ground lost during June (-0.6%, -£1,543). Annual price growth fell to +7.6%, its lowest level since March. This easing was somewhat expected given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown, and with activity supported by the start of the stamp duty holiday. In cash terms, typical prices now stand at just over £261,000, a little below May’s peak but still more than £18,500 higher than a year ago.
“Recent months have been characterised by historically high volumes of buyer activity, with June the busiest month for mortgage completions since 2008. This has been fueled both by the ‘race for space’ and the time-limited stamp duty break. With the latter now entering its final stages (the zero percent rate only applies to the first £250,000 of the purchase price, before reverting back to standard rates from October), buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead.
“Latest industry figures show instructions for sale are falling and estate agents are experiencing a drop in their available stock. This general lack of supply should help to support prices in the near term, as will the exceptionally low cost of borrowing and continued strong customer demand.
“Although there remains some uncertainty over the impact on employment from the unwinding of government support schemes, on balance the risks to the macro-environment are receding, with consumer confidence improving, the labour market recovering, and the economy expanding as restrictions are lifted.
"Overall, assuming a continuation of recent economic trends, we expect the housing market to remain solid over the next few months, with annual price growth continuing to slow but remaining well into positive territory by the end of the year.”
Regions and nations house prices
While many regions saw annual house price growth slow somewhat in July, reflecting the broader national picture, that certainly wasn’t the case everywhere.
Once again, Wales and the North of England (specifically the North West and Yorkshire & Humberside) continue to lead the way, posting the strongest annual rates of house price inflation, whilst the South West also recorded a double-digit year-on-year rise. Notably, the 13.8% annual increase in house prices in Wales was the strongest growth recorded since March 2005, whilst for Yorkshire, the 11% gain was also the highest for over 16 years. London continues to lag all regions in terms of annual inflation (+2.5%), whilst gains in the South East and Eastern England remain amongst the lowest in the UK.
Anna Clare Harper, CEO of property consultancy SPI Capital, comments: "The slight cooling off in annual house price growth is not surprising as the boom in values has been directly caused by policies around the pandemic, rather than happening despite Covid.
"Housing transactions and prices were encouraged by the temporary stamp duty reduction, which was designed to boost the housing market and confidence through the pandemic, as well as lockdown-led upsizing and a flight to safer assets. Alongside this, interest rates remain low, which helps to explain why house prices are rising so much faster than wages: money is cheap and accessible.
"The pace of house-price growth has led some commentators to fear a crash. However, demand for housing is still growing, and supply is increasingly constrained. We’re seeing less housing stock on the market in our day to day work, and in the data. And, unless interest rates rise significantly, it’s unlikely that we see a mass sell-off from property owners. Further, land and planning constraints and the growing cost and complexity of construction mean limited supply is likely to continue. We need 340,000 new homes up to 2031 and remain well below this, at around 160,000 each year for the past two years.
"So, it’s likely that the long-term trend will continue: house prices rising faster than most people’s wages. This is backed up by the data: according to Halifax, in July, house prices were £18,537 higher than this time last year, a figure far higher than average wage growth.
"This makes ‘affordable home ownership’ for most younger and less well-off people unlikely, without taking on huge debt or seeking government support."
Sundeep Patel, Director of Sales at specialist lender Together, said: “House prices for July reached another high, up by 0.4%, adding £1,122 to the cost of the average UK property. However, annual growth cooled slightly to +7.6%, its lowest level since March, with the average house price in the UK now at just over £261,000.
“It was largely anticipated that UK house price growth will slow down as 30th June marked the tapering of stamp duty relief. The housing market may lose some steam but other factors are sure to keep it steady. However, we believe the housing market will remain stable for a number of reasons, including buyers continuing to seek out suburban or rural family homes over smaller inner-city flats. Being cramped up during lockdown has made many people realise the need for outside space and we’ve seen a growing trend of city dwellers leaving to the suburbs in search of gardens. Buyers will continue to look for larger rooms or more office space as everyone adjusts to the fact that working from home is something that is here to stay.
“Specialist lenders will be intently watching how the market evolves post-pandemic. We believe there will be a greater number of customers whose circumstances have changed during successive lockdowns and, as a result, they may struggle to access the finance needed through mainstream channels. Lenders like Together will be required to fill the gap by supporting those rejected by mainstream banks, and providing the financial support they’ll be looking for to achieve their ambitions.”
