(Bloomberg) – UK house prices are rising at the slowest rate they have been in four months, an indication that the phasing out of a purchase tax break is gaining momentum in what had been a scorching market.
Home value rose 7.6% year over year in July, slower than 8.7% the previous month, according to mortgage lender Halifax. The average property value was £ 261,221 ($ 363,690).
Chancellor of the Exchequer Rishi Sunak is reducing a temporary stamp tax exemption due on property purchases, the main measure that helped prop up the market during the pandemic. It helped keep prices rising despite the biggest recession in three centuries.
“We expect the real estate market to remain solid over the next few months, with annual price growth slowing further but remaining well in positive territory through the end of the year,” Russell Galley, Halifax Managing Director, said in a statement Friday .
Underlying demand is expected to remain solid in the short term, fueled by increased consumer confidence, a shortage of homes for sale and continued low borrowing costs, according to a separate report from Nationwide on July 28th. That lender said annual price growth fell to 10.5% in July from a 17-year high of 13.4%.
The Halifax data provides preliminary evidence that the increased prices will continue after the stamp duty holidays are fully up in September, said Martin Beck, senior economic adviser for the EY Articles Club.
“Overall, the likelihood of a significant correction in house prices soon looks low”.
Wales posted the strongest gains since 2005 in the Halifax report, while London lagged all other regions with 2.5% annual growth. East of England and the South East also saw some of the slowest growth rates in the UK
A decline in the inventory of properties for sale and historically low borrowing costs will likely prop up prices in the months ahead, Halifax said.
“We’re seeing much higher demand than supply as owners are nervous about putting their properties up for sale if they can’t find the right home to buy, resulting in low inventory levels for real estate agents,” said Jan Crosby, UK Construction Leader and construction at KPMG. “This vicious circle will be difficult to overcome.”
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(Updates with quote in last paragraph.)
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