UK house prices rose by 1.7% in July after taking account of seasonal effects, offsetting the 1.6% fall in June, data from the latest Nationwide House Price Index has revealed.
July’s rebound means annual house price growth has recovered to 1.5%, from -0.1% last month. On a seasonally adjusted basis, however, the Index showed that house prices in July were 1.6% lower than in April.
Nationwide suggested that the bounce back in prices reflects the “unexpectedly rapid recovery” in housing market activity since the easing of lockdown restrictions.
“The rebound in activity reflects a number of factors,” Nationwide chief economist, Robert Gardner, commented. “Pent-up demand is coming through, where decisions taken to move before lockdown are progressing.
“Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown. Our own research, conducted in May, indicated that around 15% of people surveyed were considering moving as a result of life in lockdown.
“Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this stage.”
Nationwide’s Index also suggested the recently announced stamp duty holiday is likely to provide further support in the near-term.
The temporary increase in the Stamp Duty Land Tax (SDLT) threshold in England and Northern Ireland to £500,000 – until 31 March 2021 – should mean that around 90% of owner occupier transactions in England will pay no SDLT over the next nine months, Nationwide stated.
The Scottish Government has also raised the threshold for its equivalent Land & Buildings Transaction Tax (LBTT) to £250,000, which the Index calculated means that 80% of home purchasers in Scotland will pay no LBTT. The Welsh Government has also raised the threshold for its Land Transaction Tax (LTT) to £250,000.
“However, there is a risk this proves to be something of a false dawn,” Gardner added. “Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the after effects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”
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