U.K. House Prices Soar to Record High, Largely Boosted by Stamp Duty Holiday

The average house price in the U.K. soared to a new high in May, as buyers rushed to take advantage of the stamp duty holiday before it expires at the end of June, according to the Halifax House Price Index.

The average house price across the U.K. reached £261,743 (US$371,366) last month, the highest level on record, according to the index released Monday.

The annual growth rate, at 9.5%, was the fastest in nearly seven years. It means the average U.K. home has appreciated more than £22,000 in value over the past 12 months, Halifax managing director Russell Galley said in the report.

“Heading into the traditionally busy summer period, market activity continues to be boosted by the government’s stamp duty holiday, with prospective buyers racing to complete purchases in time to benefit from the maximum tax break ahead of June’s deadline,” Mr. Galley said.

The U.K. government lifted the stamp duty on the first £500,000 of property purchase price for a maximum savings of £15,000. The so-called stamp duty holiday was extended to June 30 from the original expiration date of March 31.

For some homebuyers, demand for bigger space with more savings at their disposal during the pandemic also helped push home prices higher, he said.

Wales led the price hike in May with an 11.9% increase year over year, while the South of England, traditionally the driving force of national house price performance, lagged behind the rest of the country. In Greater London, average prices rose 3.1% from a year ago, according to the report.

A shortage of supply also contributed to the record high prices, Tom Bill, head of U.K. residential research at Knight Frank, said in a statement.

“House prices have been driven higher by a supply squeeze as the U.K. comes out of the pandemic, an effect seen in other sectors of the economy,” he said. “More supply is starting to come through, which will redress the balance. We therefore expect U.K. house price growth to slow down after the summer, declining to mid-single digits by the end of 2021.”

Assetz Group, a property and financial service company, predicted a stronger price growth for the remainder of the year and beyond.

The figures released by Halifax demonstrate “record demand is continuing to drive pricing,” Stuart Law, the group’s chief executive, said in a statement. “While many predict house prices to taper off once the stamp duty holiday ends later in the year, we expect to see continued growth of up to 10% for both 2021 and 2022 at least.”

The optimism was rooted in the belief that changes in lifestyle preferences driven by the pandemic will continue, he said.

“People are looking for more spacious homes, further from city centers and closer to green spaces where they can continue the hybrid way of life that they have become accustomed to over the last year,” Mr. Law said. “However, there is a clear lack of appropriate housing stock in the right locations to meet these specific needs.”

Article Source: Mansion Global