U.K. Housing Market Slows With Reduction in Tax Relief
(Bloomberg) -- U.K. house prices grew at the slowest pace in four months, an indication that phasing out a tax break on purchases is taking momentum out of what’s been a red-hot market.
The value of homes rose 7.6% from a year ago in July, slower than the 8.7% pace recorded the previous month, according to mortgage lender Halifax. That put the average value of properties at 261,221 pounds ($363,690).
Chancellor of the Exchequer Rishi Sunak is tapering back a temporary exemption for stamp duty that’s due on property purchases, the main measure that helped support the market during the pandemic. It helped keep prices growing despite the biggest recession in three centuries.
“We expect the housing market to remain solid over the next few months, with annual price growth continuing to slow but remaining well into positive territory by the end of the year,” Russell Galley, managing director of Halifax, said in a statement on Friday.
Underlying demand is expected to remain solid in the near term driven by elevated consumer confidence, a shortage of homes for sale and continued low borrowing costs, a separate report by Nationwide said on July 28. That lender said the annual pace of price growth dropped to 10.5% in July from a 17-year high of 13.4%.
Halifax’s data offers tentative evidence that elevated prices will persist after the total expiration of the Stamp Duty holiday in September, said Martin Beck, senior economic advisor to the EY item club.
“Overall, the odds of a significant correction in house prices anytime soon looks small”.
Wales saw the strongest gains since 2005 in the Halifax report while London lagged all other regions with 2.5% annual growth. Eastern England and the South East also had some of the slowest growth in the U.K.
A drop in the inventory of properties available to sell and historically low borrowing costs will probably support prices in the coming months, Halifax said.
“We are seeing much higher demand than supply, with owners nervous about putting their properties up for sale in case they can’t find the right home to buy, leading to low stock for estate agents,” said Jan Crosby, head of U.K. building and construction at KPMG. “This vicious cycle is going to be hard to overcome.”
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