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Housing market is strong ‘but there is an underlying weakness that needs to be resolved’

UK property price growth slowed marginally last month as the stamp duty holiday came to a near end, but a drop in the number of homes being put up for sale looks set to keep driving up prices, according to the latest Royal Institution of Chartered Surveyors (RICS) survey.

The industry survey shows that the residential property price balance fell to +68 in September from a downwardly revised +72 in August.

Simon Rubinsohn, chief economist at RICS, said: “Both price and rent expectations [are] close to series highs pointing to greater pressure on affordability at a time when money markets are sensing interest rate increases coming sooner rather than later.”

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The UK property market appears to be strong on the surface but Tom Bill, head of UK residential research at Knight Frank believes that “there is an underlying weakness that needs to be resolved”.

He continued: “The imbalance between supply and demand is unsustainable and in many cases arises because prospective sellers are unable to find anywhere to buy themselves, creating a vicious circle of low supply. In some cases, they cannot even find properties to rent as a short-term option.

“There were 13 new buyers for every property listed in the UK in September. Over the last five years, the only time demand has exceeded supply to a greater extent was in January 2020, the first month of the short-lived Boris bounce.

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“The imbalance is keeping upwards pressure on prices but, like many other parts of the economy, needs to resolve itself over the next six months to ensure greater stability in the UK housing market in 2022.”

Fears that the end of stamp duty holiday would mean a tapering off in demand have evidently been disproved with demand for properties high, despite rising prices, according to Peter Beaumont.

He said: “While the ratio of average house price to average salary has never been higher, potential buyers are seizing a window of opportunity while borrowing rates remain low- before the chancellor announces measures to balance the books and the Bank of England steps in with measures to counter rising inflation.”

By MARC DA SILVA

Source: Property Industry Eye

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House prices up 3.6% across England and Wales in the year to September 2021

Average house prices increased by 3.6% across England and Wales in the year to September 2021, according to e.surv Chartered Surveyors’ House Price Index.

On a monthly basis, average property prices rose by 1.2% between August and September 2021.

Overall, e.surv found that the average price of a house in England and Wales was £328,610 at the end of September.

The data also shows that while some regions like the North East suffered their largest fall in the annual rate of growth (down by 6.3%) over the month, other areas like Wales fared much better.

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Wales comfortably out-performed the rest of the country – having the smallest fall in price growth from 12.2% down to 11.2%.

Richard Sexton, director at e.surv, said: “House price growth is clearly in retreat in headline terms but there is little evidence of prices stagnating or falling. Indeed, regionally, there are substantial pockets of resistance to overall falls in house price growth.

“The Land Transaction Tax holiday came to an end at the end of June – but the tax savings available in Wales were not as large as in England (£2,450 in Wales vs £15,000 in England).

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“This is we think a key reason potentially why the fall in prices in Wales has not been as significant as in England over the past few months. Wales therefore stands out as having the highest annual rate of price growth at 11.2%.

“In terms of property types, it’s worth noting too that, while the pandemic drove a race for space the price of flats in September staged a small recovery with the largest gains in flat prices being seen in prime central London and in Hammersmith and Fulham.

“On September’s data, there is little evidence that home buyers are being spooked by the end of the furlough scheme. Data from government points to a resilient job market that will further underpin buyer and lender confidence.”

By Jake Carter

Source: Mortgage Introducer

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House prices up 8% over year to July 2021 – ONS

UK average house prices have increased by 8.0% over the year to July 2021, down from 13.1% in June 2021, according to the Office for National Statistics (ONS) House Price Index.

The average UK house price was £256,000 in July 2021, which is £19,000 higher than the same time last year, following the record high of £265,000 in June 2021.

Average house prices increased over the year in England to £271,000 (7%), in Wales to £188,000 (11.6%), in Scotland to £177,000 (14.6%) and in Northern Ireland to £153,000 (9.0%).

London continued to be the region with the lowest annual growth (2.2%) for the eighth consecutive month.

Sundeep Patel said: “July’s figures show house price growth was maintained, with prices rising by 8% meaning the average UK house price now sits at £256,000- £19,000 higher than this time last year.

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“However, after months of highly inflated prices caused by unprecedented demand from hopeful buyers looking to snap up properties outside of major cities, and a race for space as we adapt to hybrid working, we are perhaps starting to see house prices stabilise slightly as the dust starts to settle following nearly 18 months of uncertainty.

“With consumer confidence increasing and an ongoing discrepancy between supply and demand when it comes to housing stock, we’re yet to see what the market could look like in a few months’ time.

“Also, with furlough ending this month, many will be anticipating the wave of support needed by those facing financial challenges.

“Whether the high street is adept enough to deal with these cases, or if this means more opportunity for specialist lenders to help is the next priority.”

John Eastgate added: “House price strength is set to continue despite the ending of the Stamp Duty holiday.

“The dramatic shortage of supply looks set to persist and the economic backdrop will underpin valuations.

“The difference this time of course is that, if anything, London price rises are behind many other parts of the country, as buying habits change and buyers’ priorities shift towards quality of life rather than quality of commute. London prices will come back strongly however as we see a return to normality.

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“Mortgage rates are more attractive than ever, however accelerating house prices will do nothing to ease affordability challenges and we should expect to see continued growth of the private rental sector, which plays an essential role in the housing landscape.”

Stuart Law said: “The stamp duty holiday was a huge motivator for buyers and fuelled one of the busiest periods of market activity we’ve seen for a decade.

“With higher tax rates starting to phase back in from July, it is no surprise that we’ve seen an impact with house price growth temporarily stalling somewhat as a result of that incentive disappearing.

“The real problem though, concerning those looking to get on the housing ladder or move up it, is the continued and acute lack of stock which defines the current housing market.

“This has substantially driven house prices up for many years, with most properties nowadays subject to competitive bidding situations, and it is continuing to hinder market activity and apply upward pressure on pricing.

“Moderate house price growth is good for homeowners on balance – a little like modest wider inflation – but unbalanced or excessive house price growth is likely to be unsustainable and restrict the ability of many prospective buyers looking to enter the market.

“Demand continues to outstrip supply and we are likely to see house prices continue to grow well over inflation over the coming months as more and more people seek to adapt their lifestyle to a reimagined post-pandemic world, striking a new balance between home and work. All of this suggests that we are set for further substantial house price growth this year and next.

“The only way to introduce balance into the supply and demand equation in a sustainable way is to dramatically increase our housebuilding output and draw on the expertise of small, local developers who can quickly leverage their local knowledge to provide new homes where they are most needed and we are hugely supportive of that, funding one in 12 of all new SME-built homes.”

By Jake Carter

Source: Mortgage Introducer

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Strong property price growth ‘to persist through 2021’

Residential property prices in the UK accelerated in August, with values now 13% higher than before the pandemic, according to the latest data from Nationwide.

The building society said that annual property price growth sped up, to 11%, with the average home costing £248,857, with signs that prices could rise further.

According to the figures provided by Nationwide, property prices recorded their second largest month-on-month rise in 15 years, up by 2.1%.

The Nationwide’s chief economist, Robert Gardner, said: “As we look towards the end of the year, the outlook is harder to foresee. Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September.”

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House prices in the summer usually see a dip as people’s attention turns to summer activities, but August has defied all odds with.

Nicky Stevenson, managing director at Fine & Country, commented: “This latest spike is stunning given that most analysts expected prices to decelerate as the stamp duty holiday entered its final throes going into the autumn.

“Those forecasts have now all proved wrong, and after a bumper summer which featured record borrowing, growth in Britain’s housing market still shows no sign of dampening.

“While the stamp duty holiday savings on big homes is quickly vanishing, a greater proportion of market activity is now in the mass market sector, buoyed by the resurgence of buy-to-let investing and first-time buyers.

“It is these sectors that continue to power double digit growth across the country.

“Based on this latest data, the market may well be running red-hot for some time to come, fuelled by low cost of borrowing, shrinking housing supply and government incentive schemes for first time buyers.

“The boom goes on.”

The widening supply-demand imbalance has also been a major factor in the housing market.

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Sam Mitchell, CEO of online estate agent Strike, said: “Let’s not forget that although the stamp duty holiday has ended, there is still a huge supply and demand imbalance issue in the UK, and the incentives that are still available – like the stamp duty savings still to be had for houses under £250,000 – are driving this imbalance further.

“The other incentives on offer will no doubt contribute to this too, with increased availability of 95% mortgages and low interest rates just some of the things that buyers can take advantage of. And who knows, the government might also have something planned to keep the market moving, but only time will tell!”

Lawrence Bowles, director of residential research at Savills, concurred: “There’s more to the housing market than stamp duty. Nationwide’s latest figures show robust house price growth in August, even with a less generous, tapered stamp duty holiday.

“Housing demand is still strong and the supply coming to the market is limited. There were 19% fewer homes listed for sale in the first half of August compared to the average for 2017-19, according to our analysis of TwentyCi data. There were 8% more sales agreed over that same period.

“As a result, we expect strong price growth to persist through 2021, though annual growth figures will ease back as we start counting growth from a higher, post-lockdown base. We expect annual house price growth to settle around 9% by the year end, with no reason to anticipate a correction in the coming years, particularly given the widely held view that interest rates will continue to remain low for the foreseeable future.”

Marc von Grundherr, added: “We’re seeing no let up in the extreme levels of house price growth seen in recent months. These hot market conditions are likely to remain beyond the summer months and well into autumn as we enter what is traditionally one of the busiest times of the year for the UK market.

“Of course, a slight dip can be expected come the end of the year. But those running for the hills at the first sight of a marginal monthly decline will do well to remember that even the best performing markets are subject to seasonal influences.”

By MARC DA SILVA

Source: Property Industry Eye

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Welsh house prices reach new peak in Q2

Welsh house prices rose to a new average peak price of £215,810 in Q2 2021, with the strongest rate of growth reported over the past year, according to Principality Building Society’s Wales House Price Index for Q2 2021.

Despite annual house price inflation of 12.5%, there was some sign that the strong pace of increases seen around the turn of the year have begun to abate, with the quarterly rate of increase now down to 1.4%.

This is likely to be a result of the Land Transaction Tax (LTT) holiday coming to an end in June, and could indicate price growth slowing in the second half of 2021.

Principality’s House Price Index estimates that there were around 13,400 transactions in Q2 2021, nearly treble the COVID-depressed level of the same time the previous year (4,800 sales), but also significantly higher than the more ‘normal’ period of Q2 2019 (11,000 sales).

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All 22 local authorities reported rises on an annual basis in Q2, repeating the performance of the previous quarter.

Prices in eight authorities reached new peaks in Q2 – Blaenau Gwent (£128,441), Bridgend (£214,081), Conwy (£222,944), Merthyr Tydfil (£159,101), Neath Port Talbot (£160,324), Rhondda Cynon Taf (£150,726), Vale of Glamorgan (£330,396) and Torfaen (£198,476).

Nine local authorities reported annual price increases of more than 15%, with Blaenau Gwent (19.6%), Bridgend (19.4%), Carmarthenshire (19.9%) and Conwy (19.7%) all reporting an annual rise of almost 20%.

Many of these local authorities also reported strong quarterly gains, in particular Bridgend (11%) and Merthyr Tydfil (15%).

A small majority of local authorities (12 of the 22) reported minor quarterly decreases, which may be a further sign that a gentler period of price inflation lies ahead.

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Three major Welsh cities – Newport, Swansea and Wrexham – along with Powys, all reported quarterly prices around 5% lower.

Tom Denman, chief financial officer at Principality Building Society, said: “The scale and strength of the housing market in Wales to date does suggest that this momentum will continue into the final quarters of the year.

“Clearly, the stimulus effect of the Land Transaction Tax holiday will have disappeared by then, and because some purchases were brought forward to capture that benefit, there will be an inevitable dip in activity.

“Alongside this, the furlough scheme ends in September, thus further revealing the underlying state of the economy and employment.

“Various forecasts suggest that Wales -along with other parts of the UK- will see house price inflation down to just under 5% in 2022 and onwards.

“Much will depend on the course of interest rates and the economy, but the mortgage market remains very competitive with rates having fallen in recent months after slightly increasing at the height of the pandemic.”

By Jake Carter

Source: Mortgage Introducer

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UK property price surge being driven by working from home

UK property price surge being driven by working from home, says Bank of England

Home buyers willing to pay more for greater space as a result of working from home is helping to drive house prices up in the UK, says the Bank of England.

Ben Broadbent, Deputy Governor, said the most recent jump in house prices reflects consumer demand for larger homes. This is because more people are anticipating needing office space in their home.

Governor Andrew Bailey also added that the rapid increase in the availability of high loan-to-value mortgages is also aiding home buyers to spend more on their new homes.

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“People have worked more at home and expect to work more from home,” said Broadbent in a Bank of England online event. “Space at home becomes more valuable, and in particular, space at home outside city centers becomes more valuable.”

Broadbent added that the Bank has observed similar trends in other countries as a result of staff being forced to work remotely for almost two years due to lockdowns.

Despite this, the housing market has lost some of its momentum in recent weeks as mortgage lender Halifax reported that house prices only increased by 7.6% year-on-year in July, compared with 8.7% the month before.

Managing director of Halifax, Russell Galley, said: “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.”

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Senior economic adviser to the EY item club, Martin Beck, said that Halifax’s report shows signs that higher property prices will persist past the end of the stamp duty holiday, which is due at the end of September.

“Overall, the odds of a significant correction in house prices anytime soon looks small,” Beck said.

KPMG’s head of UK building and construction, Jan Crosby, said: “We are seeing much higher demand than supply, with owners nervous about putting their properties up for sale in case they can’t find the right home to buy, leading to low stock for estate agents.

“This vicious cycle is going to be hard to overcome,” Crosby added.

By Harry Pererra

Source: Money Expert

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House prices set to continue rising as supply shrinks

Residential house prices will increase by 9% this year as the market is driven by the extended stamp duty holiday and the impact of repeated lockdowns, Savills has predicted.

The estate agent has upgraded its expectations from the 4% annual price growth it predicted in March, prior to the chancellor’s stamp duty holiday extension.

Savills still expect property values to rise by 21.5% over the next five years, in line with previous forecasts, as price inflation eases following the removal of incentives.

Price growth continues to be fuelled by historic low mortgage rates, along with greater demand from buyers for properties with more space and greenery following months of lockdowns.

However, the company says that the shape of growth over the next four years is more difficult to forecast precisely given the extraordinary conditions of the past 18 months.

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“Some of the growth generated by the extraordinary market conditions of 2020 and 2021 could unwind at times during 2022, but we see nothing on the horizon that would trigger a major house price correction,” said Lucian Cook, Savills head of residential research.

Savills mainstream house price forecasts and economic assumptions:

202120222023202420255yr Total
UK9.0%3.5%3.0%2.5%2.0%21.5%
London7.0%2.0%1.5%1.0%0.5%12.4%
Base rate0.1%0.1%0.1%0.3%0.5%
Unemployment (UK)6.0%4.6%4.0%3.7%3.6%
Annual Income Growth (UK)0.8%0.0%4.1%3.9%3.8%17.2%
Source: Savills, Oxford Economics

Cook continued “New buyer demand continues to outweigh supply despite the potential stamp duty saving falling from £15,000 at June 30 to just £2,500 until the end of September, and this against low levels of supply.

“This imbalance looks set to continue,  underpinning further price growth over the near term, particularly as people look to lock into current low interest rates.  But such strong growth in 2021 will leave less capacity for growth over the next few years, particularly as interest rates are expected to rise a little earlier than leading commentators had previously projected.

“The rate at which interest rates rise will also shape price growth. A steeper than anticipated jump in rates would restrict growth, although it would have to be severe to lead to actual falls in values – an outside risk in our view.”

Interest rate rises are critical to the forecasts, Savills says. The forecasts assume a Bank of England base rate no higher than 0.5% by the end of 2025.

A number of other key factors point to what Cook describes as a ‘soft landing’ for the market, rather than any dramatic correction in property values. 

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Since the market reopened last year, price growth has been driven in large part by more affluent buyers, less reliant on mortgage debt and able to lock into low fixed interest rates. More generally, the pace of economic recovery has helped reduce unemployment levels, stress testing of lending is now embedded in the system, while interest rate rises are still expected to be slow and modest by the end of 2025, meaning a gradual squeeze on affordability.

These factors underpin Savills five-year forecasts, but they also indicate limited capacity for further price growth at the end of this period, without substantially affecting who is able to buy and the number of potential transactions. 

First-time buyers are likely to be increasingly reliant on government schemes and, where available, on the generosity of the bank of mum and dad, according to Savills. 

After a strong start to the year, and over 200,000 transactions in June alone, transaction volumes are projected to total 1.62m this, more than a third – 35% – higher than the yearly average over the five years pre-pandemic.

Savills continues to expect the markets of the Midlands and the North of England to show the strongest house price growth, due to greater capacity for growth before hitting affordability ceilings.  In the short term, however, buyer attention is expected to turn back towards urban markets, including London, as social distancing restrictions and international travel restrictions ease.

This will see the ratio of regional to UK average values slowly converge over the next five years, as the lower value regions see stronger growth, “catching up” with the rest of the country.

 202120222023202420255 years to 2025Av value* Dec 2020Forecast value end 2025
UK9.00%3.50%3.00%2.50%2.00%21.50%£230,920£280,568
North West10.50%4.50%4.00%3.50%3.00%28.00%£176,925£226,464
Yorkshire & The Humber10.50%4.50%4.00%3.50%3.00%28.00%£172,326£220,577
Wales10.00%4.00%4.00%3.50%3.00%26.80%£169,846£215,365
Scotland9.50%4.00%3.50%3.00%2.50%24.40%£156,768£195,019
North East8.00%4.00%3.50%3.50%3.00%23.90%£137,531£170,401
East Midlands9.00%4.00%3.50%3.00%2.50%23.90%£200,951£248,978
West Midlands9.00%4.00%3.50%3.00%2.50%23.90%£207,603£257,220
South West8.50%3.50%3.00%2.50%2.00%20.90%£264,512£319,795
South East9.00%3.00%2.50%2.00%1.50%19.10%£336,984£401,348
East of England8.00%3.00%2.50%2.00%1.50%18.00%£310,240£366,083
London*7.00%2.00%1.50%1.00%0.50%12.40%£486,562£546,896
Source: Savills (*Nationwide)

By MARC DA SILVA

Source: Property Industry Eye

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Buyer ‘frenzy’ pushes UK house prices to fresh high

House prices have hit another fresh high, industry data showed on Monday, despite the stamp duty holiday coming to an end, as surging demand outstripped supply.

According the latest Rightmove House Price Index, the average asking price was £338,447 in July, a 0.7% improvement on June and 5.7% hike on July 2020.

Rightmove said the first half of the year had seen a “buyer frenzy” and was the busiest on record, with house prices rising 6.7% in just six months.

The UK housing market has boomed in the last year, fuelled by both pent-up demand and the stamp duty threshold being raised to £500,000. Introduced by the chancellor last year, the tax break was due to end in March 2021 but is now being tapered out, reducing to £250,000 last month June before reverting to £125,000 in September.

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Homeowners have also re-evaluated housing needs during the pandemic, which has led to an imbalance in supply and demand. Rightmove said that 140,000 more sales were agreed upon in the first half, although there were 85,000 fewer new listings than the long-term average.

“This surge in activity has revealed a shortfall of 225,000 homes for sale which, if available, would have corrected this stark imbalance between supply and demand and would have stablished price growth,” Rightmove argued.

Tim Bannister, director of property data at Rightmove, said: “We predict that the number of completed sales will be the highest ever seen in a single month when June’s data is released by HMRC later this week.

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“The pandemic’s side-effect of a new focus on what one’s home needs to provide…is one of the driving forces behind four consecutive months of new record average property prices. Demand has also been boosted by the ongoing creation of new households and property being seen as an asset to hold, with historically low returns from many other forms of investment.”

Bannister added that the June deadline for stamp duty had further helped exhaust the stock of property for sale. “This has left prospective purchasers with the lowest choice of homes for sale that we’ve ever recorded, continuing price rises and stretched affordability.”

By Abigail Townsend

Source: ShareCast

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UK House Prices to Stabilise in H2 2021?

The average price of a home in the UK rose 10 per cent between May 2020 and May 2021, according to the latest data from the Office for National Statistics (ONS).

The figures, released yesterday, showed a slightly increase from the period between April 2020 and April 2021, when house prices went up 9.6 per cent. According to the ONS, the average home in the UK increased 0.9 per cent in May 2021 to reach £255,000. This is £1,000 below the high of March 2021.

Strangely enough, the region with the lowest annual growth was London, where house prices rose just 5.2 per cent between May 2020 and May 2021.

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There was no shortage of industry comment, much of it agreeing that the escalation in prices is due to slow over the second half of 2021.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “In May, double-digit house price rises hit the dizzying heights we last saw just before the onset of the financial crisis, but this could be as good as it gets for a while. We’re not expecting precipitous falls, but rises are unlikely to be as steep in the coming months. While homeowners may miss the boost to their wealth, it could be a blessed relief for buyers.”

Coles said that the figures for May reflected the ending of the Stamp Duty holiday. “Sentiment takes a while to feed into these figures,” she said, “because the gap between the initial enthusiasm of a house buyer and final exchange is a soul-destroying period of around three months. It means many of the property sales completing by the end of May are likely to have been agreed at the start of March – when Rishi Sunak confirmed the stamp duty extension in the Budget.”

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Others were more critical. Karen Noye, mortgage expert at Quilter, said that house prices were ‘completely detached’ from current circumstances.

She added that the economy is coming to a crossroads. “Many businesses will be buoyed,” she said, “by the prospect of the biggest opening since March 2020 on the horizon but simultaneously worried about having to cope with the furlough scheme being rescinded. With the stamp duty taper about to fully go in a matter of weeks the run of house price increases may be soon about to falter.”

BY PETE CARVILL

Source: Property Wire

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UK House Price Growth Goes to 13.4% – Nationwide House Price Index

Average house price growth in the UK has risen to 13.4 per cent, according to the latest Nationwide House Price Index, released yesterday.

The figures, released yesterday, show that prices grew 0.7 per cent month on month, after the taking into account of seasonal factors.

Commenting, Robert Gardner, chief economist for Nationwide, said: “Annual house price growth accelerated to 13.4 per cent in June, the highest outturn since November 2004. While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum. Indeed, June saw the third consecutive month-on-month rise (0.7 per cent), after taking account of seasonal effects. Prices in June were almost 5 per cent higher than in March.”

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There was much comment on the increase from within the industry. Sundeep Patel, director of sales at Together, said: “Another month of strong growth for house prices goes to show just how competitive the race for space has become, with buyers still eager to snap up properties at pandemic prices, ahead of the first taper for the Stamp Duty holiday extension ending this week. Today’s figures show house prices were up by 0.7 per cent month-on-month and annual house prices rose by a staggering 13.4 per cent – the highest level recorded since November 2004.”

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He added: “That said, from the second half of the year onwards, we are expecting to see things start to slow down as potential buyers adapt to this next phase of the pandemic, without Government support and tax breaks. Whatever property financing is needed in the future, lenders who can offer a degree of flexibility are going to be highly sought after, as people look to pursue property plans against their changing needs in the market.”

Others were far more critical.

Guy Harrington: “This is only going to end one way. Given the economic backdrop and with government support schemes ending in a few months, this insane level of growth is long overdue a correction. In some rural hotspots houses are selling for 40 per cent over the asking price. The UK housing market has a rocket attached that is burning low on fuel and once this perfect storm passes, we are headed for a serious shock to the system.”

BY PETE CARVILL

Source: Property Wire

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