U.K. House Prices Fall First Time Since January, Halifax Says
U.K. house prices fell for the first time in five months in June, an indication the property market may have lost momentum as a tax incentive was due to come to an end.
The average value of a home declined 0.5% to 260,358 pounds ($359,000), mortgage lender Halifax said Wednesday. The drop followed a 1.2% increase in May and left prices 8.8% higher than a year earlier.
The figures underscore tensions upending Britain’s housing market and contrast with a report by Nationwide Building Society, which recorded the strongest growth since 2004 last month. The two major mortgage lenders have slightly different customers and reporting periods that mean their readings occasionally diverge.
“It is important to put such a moderate decrease in context, with average prices still more than 21,000 pounds higher than this time last year, following a broadly unprecedented period of gains,” said Halifax managing director Russell Galley.
Buyers have bid up prices in an effort to secure more space after 16 months of pandemic lockdowns fed expectations that working from home will become more common. That’s pushing up the cost of property outside London and other major cities, where buyers can get more space for their money. Those gains that continued through the worst recession in three centuries and have strained affordability, prompting the Bank of England to warn that property is feeding wealth inequality.
Other forward-looking indicators suggest the market will remain strong. Mortgage approvals rising in May, and the Royal Institution of Chartered Surveyors said a shortage of new properties coming to market was contributing to an increase in prices. Its next report is due on Thursday.
A tax break worth as much as 15,000 pounds to buyers helped the property market defy the plight of the wider economy during the pandemic. But those still looking for a home last month were almost certainly too late to benefit in full from the waiver, which began to wind down on July 1.
Halifax said prices in London rose 2.9% from a year ago in June as most other regions recorded double-digit gains. Wales house prices grew 12%, and in the North West and Yorkshire felt the strongest increases since early 2005.
While a recovering economy, supply shortages and pandemic-driven demand for more space may keep prices buoyant, the pace of growth is unlikely to match the second half of 2020, estate agents, analysts and lenders say.
The housing boom has raised concerns at the Bank of England in recent weeks. Andy Haldane, who stepped down as chief economist of the central bank last month, warned the “on fire” property market is driving inequality and may feed inflation.
“We would still expect annual growth to have slowed somewhat more by the end of the year, with unemployment expected to edge higher as job support measures unwind, and the peak of buyer demand now likely to have passed,” Galley said.
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