UK house prices increased by 0.7% in August from July to a record £262,954, according to the Halifax House Price Index.
But year-on-year, house price growth slowed to 7.1% in August compared with a rise of 7.6% rise in July.
The data followed the scale-back of the stamp duty holiday threshold from £500,000 to £250,000 from July. The threshold returns to its normal level of £125,000 from October.
“Much of the impact from the stamp duty holiday has now left the market, as highlighted by the drop in industry transaction numbers compared to a year ago,” said Halifax managing director Russell Galley.
He noted that apart from government schemes, the housing market has also been stimulated by structural factors, such as the demand for more space amid greater home working.
“These trends look set to persist and the price gains made since the start of the pandemic are unlikely to be reversed once the remaining tax break comes to an end later this month,” he said.
“Moreover, the macroeconomic environment is becoming increasingly positive, with job vacancies at a record high and consumer confidence returning to pre-pandemic levels. Coupled with a supply of properties for sale that looks increasingly tight and barring any reimposition of lockdown measures or a significant increase in unemployment as job support schemes are unwound later this year, these factors should continue to support prices in the near-term,” Galley added.
Shares in UK housebuilders slipped in the wake of the data, with Taylor Wimpey (LSE:TW.) PLC down 0.82% at 176.45p and Persimmon PLC down 0.45% at 2,865p in morning trade. Meanwhile, Barratt Developments PLC shares were 0.14% lower at 713.6p, while Berkeley Group Holdings PLC shares fell 1.28% to 4,738.5p.
“Forces affecting the housing market are not all positive,” noted Martin Beck, senior economic advisor to the EY ITEM Club.
“On measures such as the ratio of house prices to household incomes, affordability looks increasingly stretched. And despite a recovering economy, higher inflation, the prospect of some increase in unemployment when the furlough scheme ends and the reversal of other supports to household incomes will weigh on households’ finances. But elevated house prices are unlikely to see any significant fall for the foreseeable future.”