House prices dip in July as activity wanes following stamp duty taper
This was a change from the 0.7% monthly growth recorded in June, according to the Nationwide house price index.
Annual price growth remained in the double figures at 10.5%, but this was down from a yearly increase of 13.4% the month before.
Stamp duty holiday not a major motivator
While transactions in June reached a record high of nearly 200,000 due to the end of the first phase of the stamp duty holiday, this was not the main driver for purchase activity, Nationwide said.
A survey conducted by the mutual found a quarter of homeowners were either in the process of moving or considering it because of the pandemic. Three-quarters of those said they would have done so even without the stamp duty holiday extension.
Robert Gardner, chief economist at Nationwide, said demand would remain solid in the near term.
“Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with a lack of supply on the market, suggests continued support for house prices. But, as we look toward the end of the year, the outlook is harder to foresee.
“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,” he said.
Gardner added: “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.”
Price crash avoided
Property prices declining in June was a sign of the market cooling off after six months of frenetic activity, industry figures said.
However, a lack of housing stock and first-time buyers coming back into the market will sustain demand and prevent significant drops in house prices.
Robert Payne, co-founder of Langley House Mortgages, said: “The first half of July was noticeably quieter, but this happens every year as families prepare for the schools to break up, and then you had the Euros on top.
“The level of enquiries we’ve been getting has actually increased significantly since then, predominantly among first-time buyers who are finally getting a look in now that the competition has reduced.”
Imran Hussain, director of Harmony Financial Services, added: “The market in July was as busy as ever and with the unprecedented lack of stock, don’t expect prices to fall.
“I can’t see price growth continuing at its recent rate in the second half of the year due to the first phase of the stamp duty holiday ending, but the sheer number of first-time buyers will keep prices ticking along comfortably.”