According to the Nationwide House Price Index[i], annual house price growth remained in double digits but fell back to 10.5% in July, down from the 17-year high of 13.4% recorded the previous month (chart of the month). In month-on-month terms, house prices fell by 0.5%, after taking account of seasonal effects, following a 0.7% rise in June. The modest fallback in July was unsurprising given the significant gains recorded in recent months. Indeed, house prices increased by an average of 1.6% a month over the April to June period – more than six times the average monthly gain recorded in the five years before the pandemic. Furthermore, another possible explanation for the slowdown is that stamp duty changes have started impacting market dynamics by taking some of the heat out of the market. The nil rate band threshold decreased from £500,000 to £250,000 at the end of June, which provided a strong incentive for prospective buyers to complete house purchases before the end of June[ii].
Chart of the month: Monthly UK house price, annual % change
Source: Nationwide House Price Index, Blend Network
Market Commentary
- The overview offered by the Nationwide House Price Index is fairly in line with the one offered by the Halifax House Price Index: The average UK house price slipped by -0.5% in June, the first monthly fall since January. As a result, annual house price inflation also eased back slightly from May’s 14-year high of +9.6% to stand at +8.8% in June[iii].
- Russell Galley, Managing Director at Halifax, expects that with the stamp duty holiday now being phased out, the market might start to lose some steam entering the latter half of the year and explains that Government support measures over the last year have helped to boost demand, particularly amongst buyers searching for larger family homes at the upper end of the market[iv]. Indeed, the average price of a detached UK home has risen faster than any other property type over the past 12 months, up by more than 10% or almost £47,000 in cash terms. At a cost of over half a million pounds, they are now £200,000 more expensive than the typical semi-detached UK house.
- According to Savills, buyer demand has cooled over the last few months but remains above ‘normal’ levels[v]. Savills also reports a growing shortage of supply, which is also reflected in data by Zoopla who found that stock of homes for sale was down 24% in the year to mid-June, compared to the average in 2020. This lack of supply coupled with strong demand has resulted in the fastest moving market in at least five years[vi].
Property Market News
- According to a survey by Nationwide[vii], the difficult journey to home ownership has been exacerbated by the impact of the pandemic. 63% of respondents said the UK has a housing crisis, rising to 71% of private renters, and a quarter of renters said Covid-19 has made it less likely they will be able to buy their own home.
- House builders costs increased by 1.7% in Q1 2021 and by 3.6% between Q1 2020 and Q1 2021 according to the BCIS Private Housing Construction Price Index (PHCPI)[viii]. Majority (94%) of respondents to the survey reported increases in costs. Of those, 44% stated increases in cost of materials, 37% indicated changes in both labour and material costs, 13% stated sub-contractors’ costs while 6.0% indicated labour costs[ix].
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[i] Source: https://www.nationwide.co.uk/about/house-price-index/headlines#tab:Headlines
[iii] Source: https://www.halifax.co.uk/assets/pdf/june-2021-house-price-index.pdf
[iv] Source: https://www.halifax.co.uk/assets/pdf/june-2021-house-price-index.pdf
[v] Source: https://www.savills.co.uk/research_articles/229130/316262-0
[vi] Source: https://www.savills.co.uk/research_articles/229130/316262-0
[vii] Source: https://www.nationwidemediacentre.co.uk/news/difficult-journey-to-home-ownership-exacerbated-by-the-impact-of-the-pandemic
[viii] Source: https://www.rics.org/uk/products/data-products/insights/private-housebuilders-costs-continued-to-increase-in-1q-2021/
[ix] Source: https://www.rics.org/uk/products/data-products/insights/private-housebuilders-costs-continued-to-increase-in-1q-2021/
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