UK house prices record double-digit growth for fifth month in a row

Pace of growth slows as tapering of stamp duty holiday takes effect

British house price increases slowed in September, rising 10 per cent compared to the same period a year ago in the fifth month of double-digit growth in a row.

The dip on the 11 per cent annual increase recorded in August reflected the tapering of the stamp duty tax break, which began on July 1, according to the Nationwide House Price Index.

Prices increased by just 0.1 per cent month-on-month, taking the average UK house price to £248,742, about 13 per cent higher than before the pandemic began in early 2020.

Robert Gardner, Nationwide’s chief economist, said the outlook for the sector "remains uncertain", with activity likely to 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".

"Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises as government support winds down, as seems likely," he said.

Britain’s property market experienced a mini-boom during the Covid-19 pandemic as the stamp duty holiday introduced by Chancellor of the Exchequer Rishi Sunak in July last year propelled prices upwards, along with pandemic-fuelled demand for larger homes away from city centres as the work-from-home trend took hold.

Rapidly rising house prices are creating financial problems for potential first-time buyers, despite record low mortgage rates being offered by lenders.

House prices have continued to rise more quickly than earnings in recent quarters ...
Robert Gardner, Nationwide

"House prices have continued to rise more quickly than earnings in recent quarters, which means affordability is becoming more stretched," Mr Gardner said.

"Raising a deposit remains the main barrier for most prospective first-time buyers. A 20 per cent deposit on a typical first-time buyer home is now around 113 per cent of gross income - a record high."

British mortgage approvals dipped for a third month in a row in August with mortgage providers authorising 74,453 home loans compared with 75,100 in July.

Buyers in tourist hotspots - which have become increasingly popular for relocating buyers - were at risk of being priced out of purchasing a home in the areas where they worked, according to a recent report by the Office for National Statistics.

However, London house prices posted the worst performance in the UK in the third quarter, as the market continued to rebalance in the wake of the pandemic.

The annual change in prices in the three months through September was just 4.2 per cent in the capital, less than a third of the growth seen in Northern Ireland and Wales, Nationwide said, compared to the quarterly average of 10.3 per cent.

The reading continues a pattern that has been seen since the coronavirus hit, with buyers still looking for more space and gardens after months of confinement during a series of lockdowns.

“Recent price patterns suggest an element of rebalancing is occurring where most of the regions that have seen the strongest price growth are those in which affordability is still close to or below the long run average,” said Mr Gardner.

The stamp duty threshold in England and Northern Ireland will return to normal levels from Friday when the tax break comes to an end, with a flurry of activity in June as buyers rushed to maximise their tax discounts.

Updated: September 30th 2021, 3:43 PM