The latest market analysis from Halifax this morning has revealed that average house prices have dipped for the first time since January as the stamp duty holiday winds down. Halifax data shows that annual house price inflation in June was 8.8% - a drop of 0.8% against the 9.6% recorded in May.
According to Halifax, the average UK property price now stands at £260,358.
Regions and nations house prices
Whilst the two Midlands regions and Greater London saw slightly slower annual price gains compared to May, all the other regions and nations saw a strengthening of inflation.
Wales (12.0%) continues to lead the way on annual house price growth, registering its strongest performance since April 2005, whilst Northern Ireland (11.5%), the North West (11.5%), Yorkshire and Humberside (10.9%) and Scotland (10.4%) all registered double-digit gains.
For Northern Ireland and Scotland, the annual price rises were the highest recorded since late 2007, while for the North West and Yorkshire, inflation was the strongest since early 2005.
At the other end of the scale, the South of England continues to lag somewhat behind the rest of the country (Eastern England and the South East recording inflation rates of around 7%).
However, once again it's Greater London that is somewhat of an outlier: house price inflation there was just 2.9% year-on-year, though as we’ve noted previously, there are several unique factors likely to be weighing on the capital’s property market.
Russell Galley, Managing Director, Halifax, comments on this morning's data: “The average UK house price slipped by -0.5% in June, the first monthly fall since January. As a result annual house price inflation also eased back slightly from May’s 14-year high of +9.6% to stand at +8.8% in June. It is important to put such a moderate decrease in context, with average prices still more than £21,000 higher than this time last year, following a broadly unprecedented period of gains.
“With the stamp duty holiday now being phased out, it’s was predicted the market might start to lose some steam entering the latter half of the year, and it’s unlikely that those with mortgages approved in the early months of summer expected to benefit from the maximum tax break, given the time needed to complete transactions.
“That said, with the tapered approach, those purchasing at the current average price of £260,358 would still only pay about £500 in stamp duty at today’s rates, increasing to around £3,000 when things return to normal from the start of October.
“Government support measures over the last year have helped to boost demand, particularly amongst buyers searching for larger family homes at the upper end of the market. Indeed, the average price of a detached home has risen faster than any other property type over the past 12 months, up by more than 10% or almost £47,000 in cash terms. At a cost of over half a million pounds, they are now £200,000 more expensive than the typical semi-detached house.
“That power of home movers to drive the market, as people look to find properties with more space, spurred on by increased time spent at home during the pandemic, won’t fade entirely as the economy recovers. Coupled with buyers chasing the relatively small number of available properties, and continued low borrowing rates, it’s a trend that can sustain high average prices for some time to come.
“However, we would still expect annual growth to have slowed somewhat more by the end of the year, with unemployment expected to edge higher as job support measures unwind, and the peak of buyer demand now likely to have passed.”
Anna Clare Harper, CEO of property consultancy SPI Capital, adds: "House price growth slowed to 8.8% in June, compared to 9.6% in May but this slight cooling off has been anticipated since the boom in prices has arguably been directly caused by the pandemic and policies around it.
"Housing transactions and prices were egged on 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 ongoing low-interest rates. The tapering down of the temporary stamp duty reduction takes the pressure off demand.
"However, supply is still constrained, construction is getting harder and more expensive, and a mass sell-off from property owners is unlikely in the absence of significant interest rate rises. 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 June, house prices were £21,000 higher than this time last year, not far off average household incomes in the country, and far higher than average wage growth.
"This makes ‘affordable home ownership’ for most younger and less well-off people unlikely. ‘Boomers’ tend to see homeownership as a reflection and determinant of success. By contrast, younger people don’t all want or need to ‘get on the property ladder’. Yes, it would be nice, but the higher priority is quality, affordable rental housing.
"Ultimately, the data suggest that with house price growth cooling off, but house prices and rents still rising, it is a great time for investors who are serious not just about making money, but about providing good quality housing for their tenants. It is also a great time for policy makers to consider what measures will facilitate affordable rental housing for all - not just new build, prime high rise flats, but family homes - both new and existing."
