ONS Figures highlight impact of SDLT holiday

ONS figures have shown average house prices have reached a record £266,000, £1,000 higher than the same time last year. 

UK average house prices increased by 13.2% over the year to June 2021, up from 9.8% in May 2021, the highest annual growth rate the UK has seen since November 2004.

The figures come against a backdrop of uncertainty over inflation which  fell to 2% in July (down from 2.5% in June). The Bank of England expects inflation to rise in the coming months, hitting 4% by the end of the year.

Some continue to report bouyancy in the market with research by U-See Homes suggesting that homes are going under offer at such a pace in the current market that many buyers are finding they have already gone under offer between arranging to view and actually making it through the front door. 51% of buyers said they had experienced this happening, with 33% seeing it happen with up to a quarter of their scheduled viewings.

The RICS July 2021 Residential Survey results reveal a slightly softer month for new activity across the housing market. Although a decline in activity is to be expected following the end of the stamp duty holiday in June, the survey also shows that the lack of available stock will continue to impact property prices toward the end of the year with Rightmove predicting an Autumn “bounce” in property activity.

Commentators have been quick to point to the SDLT holiday as a major factor in the pricing spike.

Commenting on the figures ONS Head of Prices Mike Hardie said:

“In June, UK house prices saw their highest annual growth since 2004. This figure, however, was boosted by large monthly growth, with a rush to complete purchases before changes to the stamp duty holiday came into effect at the end of June.

Andy Sommerville, Director at Search Acumen, echoes predictions of an Autumn bounce saying

“The 13.2% annual increase in house prices for June, fuelled by a rush of Stamp Duty-averse homebuyers, has left a mountain to climb not only for first-time buyers’ deposits, but also for legal professionals in terms of processing transactions on time. The tapering of the Stamp Duty holiday since June has finally started to cool down a market that has been red hot since last summer. Sellers may have to reconsider their pricing while some buyers who were prepared to stretch their finances might not be in a position to do so now they are facing a larger tax bill.

“However, we expect only a brief summer interlude before house prices start to grow again in the Autumn. Demand is still extremely high by historic standards, fuelled by record low interest rates and people’s attempts to adapt their lives to key societal changes, such as home working, which are set to become a more permanent feature of the post-pandemic world. At the same time, the market is still characterised by a chronic undersupply of available housing stock. These two factors are likely to sustain house price growth later this year.

“The conveyancing sector has now been operating at full capacity for the best part of a year, keeping the market moving despite unprecedented levels of demand and the once-in-a-generation challenge of the pandemic. As the pressure eases briefly, there is a crucial window of time to reflect on lessons learned. Technology has created efficiencies during the pandemic, and forward-thinking property firms have had a taste of how data-driven decisions and real-time access to information can improve the customer and adviser experience.

“Wider adoption of data-led ways of working can help to cope with the busy market we expect to see during the autumn and into next year.”

While Sarah Coles, personal finance analyst, Hargreaves Lansdown suggests that we’ll see a flattening of prices as sales start to slow.

“There are already signs that this boom is slowing. RICS says new buyer demand fell after the end of the stamp duty holiday, while lenders reported small falls in mortgage approvals. But neither of these changes have been particularly striking. Record low mortgage rates continue to support healthy demand, while a shortage of properties for sale will keep prices up.”

“It means that instead of facing a precipitous plunge from these new highs, we’re more likely to see price rises flatten out, and sales slow as the stamp duty holiday finally ends in September.”

Unusually, the increases are being seen across the country, not concentrated in London, a point highlighted by Iain McKenzie, CEO of The Guild of Property Professionals:

“These figures paint an arresting picture of the frenzy we saw towards the end of the full stamp duty holiday as house prices boomed with buyers rushing to get their key in the lock.

“Areas outside of London still continue to lead the way on house price growth, as people scour the country for more living space.

adding

“Despite the winding down of the stamp duty holiday and more people feeling the pressure to return to the office, all the elements are still in place for house prices to remain higher than usual for the foreseeable future.

“With demand for properties still ever-present and estate agents across the country facing a smaller pool of homes to sell, many prospective buyers will also be sitting on their deposit until the perfect home comes along. This factor will keep prices higher in the long term.”

Today's Conveyancer