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House prices spring back as stamp duty cut set to boost values further

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Written by: Lana Clements
31/07/2020
House prices grew 1.5% in the year to July as the market recovers from lockdown and the coronavirus. But economists caution the trend could be a “false dawn”.

Values leapt 1.7% month-on-month, reversing the falls seen between May and June, according to the Nationwide house price index.

The lender predicted the stamp duty holiday will provide a further boost to prices in the coming weeks.

The average home value in the UK now stands at £220,936, according to the index.

Nationwide chief economist Robert Gardner said: “The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.

“The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.

“Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.

“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward. However, there is a risk this proves to be something of a false dawn.

“Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.”

Stamp duty little benefit to first-time buyers

Home movers will reap the biggest benefit of the stamp duty holiday, Nationwide’s analysis showed.

Buyers in London and the South East where house prices are high will also save more than other parts of the country.

Gardner said: “Typical savings are likely to be fairly modest for the majority of buyers in the north of England, Scotland and Northern Ireland.

“In Wales, the previous lower threshold for LTT of £180,000 was already above the average house price in the principality.

“Moreover, some of the stamp duty saving is likely to get passed on in terms of higher house prices.

“The stamp duty holiday is also likely to lead to increased volatility in transactions levels, especially around the end of the holiday, which in the past has led to significant spikes in activity.”

Tomer Aboody, director of property lender MT Finance, added: “Nationwide points to a busy and productive July, which is great for a property market which had been so static for most of the year.

“It’s no coincidence that this uptick has come at the same time as the introduction of a stamp duty holiday on purchases up to £500,000.

“Brexit and Covid-19 aside, stamp duty has been the biggest negative influence on the housing market in recent times since the introduction of higher rates on more expensive properties.

“This has to be resolved and dealt with, or whatever bounce we have seen in the past few months will only be a temporary one. The government not only has to look to extending the existing holiday but possibly making it permanent, while also looking at benefiting the higher end also.”

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