Property prices have continued to rise but at a slower pace since the stamp duty holiday came to an end, according to the Nationwide HPI report for July.
Annual house price growth slowed to 10.5 per cent in July, from the 17-year high of 13.4 per cent recorded the previous month.
In month-on-month terms, house prices fell by 0.5 per cent, after taking account of seasonal effects, following a 0.7 per cent rise in June.
The chief executive officer of Chestertons, Guy Gittins, said: “The inflated market activity we have seen due to the Stamp Duty Holiday appears to have finally reached its peak after an unprecedented number of property sales during the first half of the year.” Gittins noted that the estate agents still “have a record number of cumulative buyers remaining who are looking to buy.”
“With the easing of lockdown restrictions,” Gittins said, “buyers remain eager to take control of their lives again and a big part of this is to find a property and location to call home.”
Chief economist at Nationwide, Robert Gardner, said: “The modest fallback in July was unsurprising given the significant gains recorded in recent months.”
House prices increased by an average of 1.6 per cent a month over the April to June period – more than six times the average monthly gain recorded in the five years before the pandemic.
“The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market,” he added.
Stamp duty changes, the chief economist said, affected when people bought properties as they raced to get transactions completed.
For example, the scheme drove the number of housing market transactions to a record high of almost 200,000 in June as home buyers rushed to beat the deadline – around twice the number of transactions recorded in a typical month before the pandemic.
Land Registry data, said Gardner, also indicates that the purchases of higher priced properties have been driving the increase in housing market activity since the pandemic struck.
He said the proportion of sales involving detached and semi-detached properties increased, while the proportion involving flats has declined significantly over the past six months.
Despite these trends spurred on by tax changes, “they have not been the main factor prompting people to move in the first place.”
Three quarters of homeowners surveyed at the end of April, who were either moving home or considering it, said their decision would not have changed even if the stamp duty holiday had not been extended beyond the original March 2021 deadline.
Instead the pandemic, Gardner believes, has made people reassess their housing needs and seek something to fit those.
A quarter of the surveyed homeowners who were in the middle of moving, or considering it, said it was as a result of the pandemic.
While “underlying demand is likely to remain solid in the near term” as consumer confidence has rebounded recently, said Gardner, the outlook for the end of 2021 is “harder to forsee.”
“Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.”
“Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, as government support schemes wind down. But even this is far from assured. Even if the labour market does weaken, there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”