UK house prices jump unexpectedly in August
UK house prices jumped unexpectedly in August driven by strong demand for homes in the lower segment of the market, according to new figures released today.
Data from Nationwide shows house prices rose 11 per cent annually in August, up from July’s 10.5 per cent increase.
The shock rise is likely being driven by the stamp duty holiday still providing financial incentives for prospective homeowners seeking to purchase a property at the lower end of the market.
Robert Gardner, chief economist at Nationwide, said: “The strength may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, though the maximum savings are substantially lower.”
After 30 June, changes to the stamp duty holiday resulted in buyers paying tax on the first £250,000 of a transaction instead of £500,000. The new taper is scheduled to end at the beginning of October.
A return of mortgage providers to the lower end of the loan-to-value market has enabled buyers with low valued deposits to finance home purchases, supporting overall demand.
House prices surged 2.1 per cent over the last month, a sharp uptick from July’s 0.6 per cent contraction.
A shortage of property stock, combined with the historically low interest rate environment, is also feeding into strong demand for homes.
The stock of savings amassed during the pandemic has provided previously cash-poor prospective buyers, who typically buy lower valued properties, an opportunity to purchase a home.
However, Nationwide warned that demand in the market may weaken in the coming months as government support schemes, such as the furlough initiative, finally come to an end.
“Underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when government support schemes wind down,” Gardner added.
Nicky Stevenson, managing director at Fine and Country, said: “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.”