UK house price growth has dropped to its slowest pace in fourth months, new data shows, as the end of the temporary stamp duty holiday ended a boom in the property market.
Halifax said on Friday that annual house price growth in the UK slowed to 7.6% in July, down from 8.7% in June. July’s reading was the lowest since March. The slowdown came as a tax break on property transactions came to an end. The chancellor announced a stamp duty holiday in July 2020 that ended in June. This easing was somewhat expected given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown, and with activity supported by the start of the stamp duty holiday. In cash terms, typical prices now stand at just over £261,000 – a little below May’s peak but still more than £18,500 higher than a year ago. Wales and the North of England recorded the strongest house price growth across the UK. Prices rose by 13.8% in Wales, which was the highest monthly increase since 2005. London saw some of the weakest price growth, at just 2.5%. Recent months have been characterised by historically high volumes of buyer activity, with June the busiest month for mortgage completions since 2008. This has been fuelled both by the ‘race for space’ and the time-limited stamp duty break. With the latter now entering its final stages (the zero percent rate only applies to the first £250,000 of the purchase price, before reverting to standard rates from October), buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead.
Bank of England holds rates
The Bank of England opted Thursday to keep its main interest rate at the record low of 0.1% as it painted a fairly rosy picture about the near-term prospects for the British economy following the lifting of lockdown restrictions in the wake of the rapid rollout of coronavirus vaccines. In a statement accompanying its decision, the central bank’s rate-setting Monetary Policy Committee said “a waning impact” from COVID-19 would boost demand growth and help the British economy reach its pre-pandemic level by the end of the year. The committee also maintained the bank’s monetary stimulus at current levels though one of its eight members voted to reduce the level of asset purchases from £875 billion to £830 billion. The decision to keep rates unchanged was unanimous. In its quarterly economic projections, the bank said the British economy is set to rebound by 7.25% this year, unchanged from its previous projection. However, it modestly upgraded its forecast for next year to 6% from 5.75%. The bank said growth is expected to slow toward more normal rates, partly reflecting lower government spending as many pandemic programs, such as a salary support scheme, end. One uncertainty cited was how the economy will adjust to the end of the furlough scheme, which was introduced at the start of the pandemic last March to ensure unemployment didn’t rise substantially when lockdown restrictions were imposed. Under the program, the government paid 80% of the salaries of those workers unable to work because of lockdown measures. The program helped support over 11 million people but the number now is down below the 2 million mark as many sectors have reopened, notably hospitality. It kept a lid on unemployment, which remains relatively low at around 5%. The committee also warned of a “more pronounced period” of above-target inflation in the near term than expected in May but said that its overall view is that cost pressures will prove “transitory.”
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