The latest UK HPI data published this morning covering July 2021 shows that average house prices in the UK increased by 8.0% in the year to July 2021, down from 13.1% in the year to June 2021.
According to the figures, the average UK house price was £256,000 in July 2021 - £19,000 higher than this time last year, following the record high of £265,000 in June 2021.
Average house prices increased over the year in England to £271,000 (7%), in Wales to £188,000 (11.6%), in Scotland to £177,000 (14.6%) and in Northern Ireland to £153,000 (9.0%).
London continues to be the region with the lowest annual growth (2.2%) for the eighth consecutive month.
Anna Clare Harper, CEO of property consultancy SPI Capital, says: "UK house prices increased by 8 per cent in the year to July 2021, with a monthly reduction of 3.7 per cent from June 2021. This is no surprise or cause for concern. The data reflects the comedown from an artificial boom encouraged by the temporary reduction in stamp duty, which began ‘tapering down’ in June.
"Investors, homeowners, solicitors and banks pushed hard to get transactions done in time for buyers to capitalise on lower transaction costs. This was followed by a slowdown in pace.
"The temporary stamp duty reduction, alongside billions of pounds worth of loans and grants, were designed to protect consumer and investor confidence through the pandemic. Combined with lockdown-led upsizing and low-interest rates, the pandemic and policies around it created a boom, rather than this boom happening ‘despite’ Covid-19.
"Some will see this as another example of intergenerational inequality. The stamp duty reduction specifically has created a boom that has put housing beyond the reach of many households. The average house price of £255,535 is nearly nine times median household income of £29,000.
"Further, house prices seem unlikely to fall below their pre-pandemic levels because people don’t tend to sell houses at a lower price than they paid unless they really need to. Interest rates (and therefore mortgage repayments) remain low, meaning the kind of mass sell-off needed from property owners if prices were to fall seems unlikely."
Kevin Roberts, Director, Legal & General Mortgage Club, comments: “Though it is positive to see the Stamp Duty holiday continue to accelerate existing purchase activity and buoy the value of homes, we must remain mindful that we are operating in a distinctly two-track market.
“On one side, purchase activity remains high, with the Government tax break, record low-interest rates and other long-standing Government support measures encouraging record numbers of buyers to push on with their homeownership ambitions. Indeed, our SmartrCriteria tool recorded a 41% uptick in searches for Help to Buy criteria in July, while Shared Ownership also appeared in the top 20 most searched terms, helping to alleviate any fear of a cliff-edge moment for the market following the end of the Stamp Duty tax break.
“However, the market has also seen a growing need for products suitable for borrowers with credit impairments and irregular income. Our SmartrCriteria data recently revealed that searches for borrowers with bankruptcy jumped by 24% in July alone, while those for borrowers employed via a fixed-term contract grew by almost a fifth (17%).
“With this in mind, as the Stamp Duty holiday draws to a close, we must celebrate the way it has supported demand for purchase activity while also remaining mindful of those with challenging financial circumstances and needs which differ considerably from those enjoying the tax break. This is where enlisting the help of an independent and experienced mortgage adviser will be key to finding the best deal, on either side of the two-track market.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: "House prices continued to rise in July, although unsurprisingly at a slower pace than in June. The start of the stamp duty holiday taper had a dampening effect on the market, although even though it was July and thoughts were turning to holidays, people carried on moving. Of course, the national average masks significant regional differences with prices increasing by far more in the North East (10.8 per cent) than London (2.2 per cent).
"In contrast to early on in the pandemic when lenders pulled up the drawbridges, there is an eagerness to lend, with average mortgage rates on two- and five-year fixes falling to all-time lows. With twice as many mortgages available now compared with a year ago, borrowers are in a strong position. Assuming they can find the property they wish to buy, thanks to limited supply, there is plenty of choice of mortgages at low rates.
"The market is set for a strong autumn. While the stamp duty holiday comes to an end later this month, there are still many buyers who wish to move to get more space, and cheap mortgages will help them do that."