UK house prices rise by ‘surprising’ 2.1% after fall in July

British house prices rose by 2.1 per cent month on month in August after a 0.6 per cent fall in July, despite the phasing-out of a tax break for purchases in England and Northern Ireland, figures from mortgage lender Nationwide showed on Wednesday.

House prices in August were 11.0 per cent higher than a year ago, a bigger increase than the 10.5 per cent rise Nationwide recorded in July and bucking economists’ expectations in a Reuters poll for a slowdown to 8.6 per cent.

British house prices have boomed over the past year – like those in a number of advanced economies – as the Covid-19 pandemic spurred greater demand for more spacious housing.

But a number of indicators had shown a slowdown in activity in July after the partial withdrawal of a reduction in property purchase tax, known as stamp duty. The tax break will be withdrawn in full at the end of September.

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“The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market,” Nationwide chief economist Robert Gardner said.

Demand for property priced £125,000-250,000, which still benefits from the tax break until the end of September, as well as lack of homes to buy, could be behind the rise, he added.

August’s monthly increase was the second-largest in more than 15 years, after a 2.3 per cent rise recorded in April, and July’s 0.6 per cent drop represented a small revision from an initial estimate of a 0.5 per cent fall in seasonally-adjusted prices.

Underlying demand was likely to remain strong in the short term but could weaken later when the stamp duty exemption ends and the government withdraws furlough support for workers who have been unable to work due to the pandemic, Nationwide said. – Reuters