The average UK house price slipped by 0.5 per cent last month, as government support has started to wind down.
In June, the average price of a UK house sat at £260,358 compared with 261,642 in May, according to Halifax’s latest house price index.
Whilst average prices have slipped month-on-month, they are still more than £21,000 higher than this time last year.
This prompted Karen Noye, mortgage expert at Quilter, to call June’s house price decrease “a small splutter from a housing market which has been full steam ahead for a long time”.
Anna Clare Harper, chief executive of property consultancy SPI Capital, added: “This slight cooling off has been anticipated, since the boom in prices has arguably been directly caused by the pandemic and policies around it.
“Housing transactions and prices were egged on by the temporary stamp duty reduction, [...] as well as lockdown-led upsizing and a flight to safer assets, alongside ongoing low interest rates.”
With the stamp duty holiday wind down coming into effect this month, the current average price of £260,358 now has to pay around £500 in stamp duty land tax. In October, when stamp duty returns to pre-pandemic levels, this will increase to around £3,000.
Managing director at Halifax, Russell Galley, said the government support measures over the past year “have helped to boost demand, particularly amongst buyers searching for larger family homes at the upper end of the market”.
But as Harper pointed out, “supply is still constrained”. She continued: “Construction is getting harder and more expensive, and a mass sell-off from property owners is unlikely in the absence of significant interest rate rises.”
Looking back at the last year, which has seen house prices continue on an upward trend, Harper predicted house prices will continue to climb “faster than most people’s wages”.
“This makes ‘affordable home ownership’ for most younger and less well-off people unlikely,” she concluded, prompting her to observe that now is “a great time” for buy-to-let investors.
But whilst demand for rental housing might be on the up, landlords are reassessing their positions in the market.
Recent research by Nottingham Building Society found tax changes and increasing regulation meant a fifth (20 per cent) of UK landlords were considering selling all - or at least part - of their portfolios.
Steadily reducing tax breaks and rental yields for landlords, combined with the more recent decline in rental prices due to the pandemic, have all contributed to a fall in value of buy-to-let portfolios.
For lenders, Mark Harris, chief executive of mortgage broker SPF Private Clients, said appetite “seems to be growing all the time”.
He cited announcements made by UK high street banks HSBC and TSB yesterday to lend on two-year fixed rates of just 0.94 per cent.
“Sub-1 per cent mortgage rates have been rare in the past but over the past few weeks there have been many more of them."
Martijn van der Heijden, digital mortgage firm Habito’s chief financial officer, anticipates for those “sellers who had been cautious to list their home for health reasons, or lack of job security, being double jabbed, restrictions fully easing in two weeks' time and the economy rebounding” may all provide the confidence they need to move.
He added: “With many city-based firms confirming a flexible return to offices from July, the demand for larger homes with offices and gardens could continue to drive the market in commuter towns.”
ruby.hinchliffe@ft.com
