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House prices bounced back in August after faltering slightly in July. Month-on-month, prices have increased by 2.1 percent with overall prices around 13 percent higher than when the pandemic began. Property experts were expecting the tapering of the stamp duty holiday at the end of June to slow the market down.
The latest spike in prices could be down to demand from those buying homes priced between £125,000 and £250,000 where the stamp duty holiday is still in place until the end of this month.
Buyers looking to purchase homes in this bracket can save a maximum of £2,500.
The average house price in the UK is now nudging towards £250,000 at £248,857.
Robert Gardner, Nationwide’s Chief Economist, said “underlying demand is likely to remain solid in the near term”.
The property expert also pointed out that housing supply remains low which is likely to further support house prices.
However, Mr Gardner warned that the end of the year is “harder to foresee”.
READ MORE: Property experts’ damning prediction for UK housing market
He explained: “Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
“Moreover, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, when Government support schemes wind down.
“But even this is far from assured. The labour market has remained remarkably resilient to date and, even if it does weaken, there is scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”
Energy efficiency ratings are currently having a limited impact on house prices despite push the Government’s push to go green.
Mr Gardner said the UK’s housing stock needs to be “decarbonised” and “adapted” if the nation is to meet its 2050 emission targets.
Currently, the UK’s housing stock accounts for around 15 percent of the UK’s total carbon emissions.
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Nationwide put together a special report which looked at energy efficiency ratings from energy performance certificates (EPCs) alongside the usual property characteristics data they use in their house price index.
Mr Gardner said: “Our analysis suggests that a more energy-efficient property (rated A or B) attracts a modest premium of 1.7 percent compared to a similar property rated D – the most commonly occurring rating.
“There is little difference for properties rated C or E compared with D, as shown in the chart in the attached.
“There is a more noticeable discount for properties rated F or G – the lowest energy efficient ratings.
Indeed, an F or G rated home is valued 3.5 percent lower than a similar D rated property.
“Overall, our research suggests that, for now at least, energy efficiency has only a modest influence on house prices for owner occupiers, where an impact is only really evident for the best and worst energy efficiency ratings.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country described the latest house price spike as “stunning” with many forecasts being “proven wrong”.
She explained: “This latest spike is stunning given that most analysts expected prices to decelerate as the stamp duty holiday entered its final throes going into the autumn.
“Those forecasts have now all proved wrong, and after a bumper summer which featured record borrowing, growth in Britain’s housing market still shows no sign of dampening.
“While the stamp duty holiday savings on big homes is quickly vanishing, a greater proportion of market activity is now in the mass market sector, buoyed by the resurgence of buy-to-let investing and first-time buyers.
“It is these sectors that continue to power double digit growth across the country.
“Based on this latest data, the market may well be running red-hot for some time to come, fuelled by low cost of borrowing, shrinking housing supply and government incentive schemes for first time buyers. The boom goes on.”
Jason Tebb, Chief Executive Officer of OnTheMarket.com, said the stamp duty holiday is still an incentive for buyers who are purchasing homes for up to £250,000.
Mr Tebb said now is the “best market” to sell a property in the past 20 years.
“Sellers really have never had it so good, with buyer demand fuelled by access to record low mortgage rates and the ongoing ‘race for space’,” he said.
“Anyone considering selling would be best advised to take action now, as these conditions certainly aren’t the ‘new normal’ and, as with any market cycle, activity will plateau at some point in the next few months.
“The one thing that would-be sellers do need to be mindful of, however, is that mortgage down valuations are on the increase as competitive buyers outbid each other to secure their dream home.
“There’s one thing agreeing to an offer above your asking price, but if that property is being purchased with a mortgage, then sellers need to be aware that ultimately, it’s the valuer on behalf of the mortgage lender who will dictate the price achieved.”
Director of Benham and Reeves, Marc von Grundherr, described current house price levels as “extreme”.
He said: “These hot market conditions are likely to remain beyond the summer months and well into autumn as we enter what is traditionally one of the busiest times of the year for the UK market.
“Of course, a slight dip can be expected come the end of the year.
“But those running for the hills at the first sight of a marginal monthly decline will do well to remember that even the best performing markets are subject to seasonal influences.”
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