House prices hit new high after duty cut
House prices hit an all-time high last month after the Chancellor’s stamp duty cut helped trigger a postlockdown boom. Annual house price growth reached 3.7 per cent last month, with the average home selling for £224,123, according to Nationwide Building Society. The stamp duty on properties worth less than £500,000 has been removed until April 2021, triggering a stampede of buyers and sellers. However, experts fear the bubble will burst within months.
HOUSE prices hit an all-time high last month after Rishi Sunak’s stamp duty cut helped trigger a post-lockdown boom – but experts fear the bubble will burst within months.
Annual house price growth hit 3.7 per cent in August, with the average home selling for £224,123, according to Nationwide Building Society. Property values rose by 2 per cent between July and August this year alone.
The surge has fully reversed the losses recorded while the country was in lockdown and the property market shut during April and May.
The stamp duty charge on all properties worth less than £500,000 has been removed until April 2021, triggering a stampede of bargain-seeking buyers and a rush of sellers trying to benefit from the red-hot market.
Tobi Mancuso, of property investment company Track Capital, said: “This frenzy could create a bubble in house prices that will be quickly deflated when stamp duty returns, so buyers should be wary of prices that feel inflated.”
The winding down of the furlough scheme at the end of October could also push prices down. Hundreds of thousands of people are predicted to lose their jobs, potentially leading to repossessions or forced sales. Andrew
Montlake of mortgage broker Coreco warned buyers to take a reality check. He said: “Unemployment is rising by the day, and the economic outlook is highly uncertain as the furlough scheme ends. In the final months of the year we will start to see a reversal in the current rate of house price growth, as the true impact of Covid-19 on the economy shows through.”
A poll of members of the Royal Institution of Chartered Surveyors earlier this month found that many fear the house price boom would be followed by a bust within a year.
This July saw the highest number of house sales for 10 years, according to property website Rightmove. Commercial director Miles Shipside warned that record levels of demand would pile extra pressure on to mortgage lenders and conveyancers, many of whom are struggling to cope with the increased workload.
There is a lag between the official statistics and what is happening on the ground now. The Land Registry published the official house price data too, but this shows only sales completed in May, during which the market was closed for more than half the month.
Average British prices rose by 2.9 per cent in the year to May. Wales recorded the strongest rate of growth with a 4.8 per cent year-on-year increase in prices, while in Scotland values rose by only 2.1 per cent.