UK house prices unexpectedly bounced back in July after tumbling in June, as pent-up lockdown demand was released and the stamp duty cut cheered buyers and sellers.
Building society nationwide said British prices jumped 1.7 per cent in July compared to a month earlier, when they fell 1.6 per cent. Analysts had been expecting a drop of 0.1 per cent.
In the UK year on year, house prices returned to solid growth of 1.5 per cent in July. That compared to a fall of 0.1 per cent in June. The average non-seasonally adjusted price was £220,936 this month.
“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions,” said Nationwide’s chief economist Robert Gardner.
Property prices in the Britain have stood up remarkably well considering the country is going through its worst economic slowdown in recent history.
The entire housing market was put on ice at the end of March and for the whole of April. But the government allowed it to reopen in the middle of May.
Economists and estate agents say that pent-up demand is outstripping supply and keeping prices buoyant. However, they warn that a wave of unemployment in the winter could lead to prices falling.
UK house prices to be supported by stamp duty cut
Gardner said: “Pent up demand is coming through, where decisions taken to move before lockdown are progressing.”
“Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this stage.’
He added that activity would be “further boosted by the recently announced stamp duty holiday”.
Chancellor Rishi Sunak announced a stamp duty “holiday” in his summer statement earlier in July. It instantly raised the threshold at which people pay the stamp duty property tax to £500,000 from £125,000. And it will run until the end of March 2021.
Data from property website Zoopla this week showed that the stamp duty holiday has significantly boosted London’s housing market. New sales rocketed by over a quarter in just two weeks.
EY Item Club chief economist Howard Archer said: “Housing market activity may well see a pick-up in the near term providing some support to prices, as a result of the raising of the Stamp Duty threshold, along with the release of some pent-up activity following the easing of lockdown restrictions.
“The easing of lockdown restrictions affecting the housing market has occurred later in Wales, Scotland and Northern Ireland than in England, so there may be some catching up there. This could result in house prices firming modestly over the next few months after falling back in recent months.”
Short-lived bounce back?
Experts have warned that the bounce back in UK house price growth could be short-lived as unemployment is expected to spike once government support ends.
“Many people have already lost their jobs, despite the supportive Government measures, while others will be concerned that they may very well still end up losing their job once the furlough scheme ends,” Archer added.
“Additionally, many incomes have been affected. Consumer confidence is currently still low compared to long-term norms and many people are likely to remain cautious for some time to come when making major spending decisions such as buying or moving house.”
Guy Harrington, chief executive of property lender Glenhawk, said the UK housing market is in a post-lockdown honeymoon phase.
“The reality is very different,” he said.
“The UK is staring down the barrel of a period of unprecedented pain, underpinned by mass unemployment as the furlough scheme ends and a likely second spike, which will hit consumer confidence in unimaginable ways and undo all the gains seen in recent months. If you think we’ve seen the worst, 2021 may just top it.”