House prices in the UK rose again last month by around £3,000, bringing the average property price up to a record high of £261,743.
May’s 1.3 per cent price increase means the average home in the UK has increased by more than £22,000 – or 9.5 per cent – in the last 12 months, according to figures from Halifax.
The government’s stamp duty holiday, which saw stamp duty scrapped on properties worth up to £500,000, is largely the reason of the UK’s booming house prices in the last year.
Housebuilders stocks in London soared following the news, with Crest Nicholson leading the charge, up 3.11 per cent by mid-morning.
Bellway’s share price went up 2.51 per cent, Taylor Wimpey was up 2.49 per cent and Permission rose 2.41 per cent.
The share price of Barratt Developments, Redrow and Land Securities Group also rose, up 2.31, 2.3 and 0.73 per cent respectively.
Halifax managing director Russell Galley said prospective buyers have clamoured to complete purchases in time to benefit from the maximum tax break ahead of the deadline at the end of this month, after which there will be a phased return to full rates.
He added that lockdown had provided an opportunity for some to build up savings, enabling them to spend more on properties, potentially pushing prices up even higher.
“Whilst these effects will be temporary, the current strength in house prices also points to a deeper and long-lasting change as buyer preferences shift in anticipation of new, post-pandemic lifestyles – as greater demand for larger properties with more space might warrant an increased willingness to spend a higher proportion of income on housing,” Galley continued.
“These trends, coupled with growing confidence in a more rapid recovery in economic activity if restrictions continue to be eased, are likely to support house prices for some time to come, particularly given the continued shortage of properties for sale.”
George Franks, co-founder of London-based estate agents Radstock Property, said the first half of May was “extremely busy”, as there was still a chance to purchase before the end of the stamp duty deadline.
However, he said the second half of May and first week of June were quieter, “as people have resigned themselves to missing the stamp duty deadline”.
“I don’t believe the property market is in a bubble,” Franks continued, “but it has certainly benefited from government meddling in the form of the stamp duty holiday and mortgage guarantee scheme.
“We’ve effectively had two years rolled into one due to government intervention. Looking forward, the fundamentals have not changed, namely money is cheap, it’s still cheaper to own than to rent and there is a profound lack of stock.”
Guy Harrington, CEO of residential lender Glenhawk, said the growth in property prices was unsustainable.
“I’ll eat my invisible hat if we don’t see significant pricing retrenchment by Q4, when the true impact of the pandemic on the UK economy reveals itself,” he added.