UK house prices enjoyed a surprising surge in July on the back of the recently introduced stamp duty holiday and the release of pent up buyer demand over the last few months.
Figures released by Nationwide, Britain’s largest building society, indicate that house prices increased 1.7% in July from the previous month and 1.5% year on year (after adjusting for seasonality), contrary to the slight dip experts forecast.
The uptick in demand is due to several factors. The first of these is the introduction of the stamp duty holiday by Chancellor Rishi Sunak, which increases the threshold beyond which buyers are required to pay stamp duty land tax on property from £125,000 to £500,000. Nationwide estimates that because of the new regulations, 90% of property transactions in England would have zero payable stamp duty, making it an appealing time for buyers to consider investing in property.
In addition to the stamp duty holiday, the boost may be largely in thanks to the removal of restrictions on property viewings and exchanges for prospective buyers as of mid-May, which has allowed pent up buyer demand to release over the past month and enabled housing transactions to go through.
Finally, consumers are undergoing massive behavioural shifts during the lockdown that are making them reassess their current lifestyles and housing preferences, which could also be driving demand. Many people have considered moving out of the UK, or to more rural areas, as a result of the COVID-19 pandemic, which is also one of the reasons housing is so freely available in the country.
While these figures are encouraging to see, especially as the nationwide lockdown continues to ease, experts warn this surge in housing prices is only temporary.
Nationwide’s chief economist Robert Gardner remained cautiously optimistic, citing pent up buyer demand, and changing housing preferences as the main reasons for the upward trend. However, he also added that the housing market may see a drop over the next few months due to the economic crisis which is set to hit Britain later this year.
Other forecasters expect that this surge will also slow down as government schemes wind down and job losses increase, making it increasingly more challenging for borrowers to access lines of credit.
As of now, lenders remain cautious, expecting further volatility in the housing market until the economy stabilises. The surge in buyer demand and house prices will need to be monitored, and the trends analysed over the long term in order to get a better picture of what the market might hold for the future.