Danni Hewson, AJ Bell financial analyst, comments on Nationwide’s House Price Index - June & Q2 2021 House Price Release | Nationwide
“Another month, another rise in house prices. Not a surprise as many home buyers rush to complete before the end of the stamp duty holiday. Figures from the Nationwide do show the rate of those price hikes is slowing, up just 0.7% in June compared with 1.7% in May but the average house price is now a record £245,432. That number is important because it will still qualify for the nil rate band under the stamp duty holiday, keeping the fires kindled until the end of September.
“There are many factors at play here. Cheap interest rates and the availability of low deposit deals have undoubtedly fuelled price hikes despite the country being slap bang in the middle of a pandemic which has impacted people’s economic health. But that pandemic has also spurred the market on, changing our preferences. What was top of people’s wish list two years ago is a distant memory with the potential to spin out working from home indefinitely, or at least on a part time basis, expanding the geographical map for many and adding home office to the list of demands.
“This shift is unlikely to revert back and is expected to keep the market toasty for the months to come. The X factor will be unemployment. How many people will still be in a job once the furlough scheme ends? How many mortgage holidays will result in quick sales? There’s no getting away from the fact that the next few months will be difficult for many people once support is withdrawn.
“And that stamp duty holiday, it has done what it set out to do, the question is was it needed at all and what impact will its end have on market conditions? When you look at Scotland’s muted growth you can see the legacy of a scheme’s end.
“There’s a lot for housebuilders to wrap their heads around, plans will need to be altered, both in terms of location and layout. And price - will people still be prepared to fork out ever increasing sums for their abode? With all those savings still sloshing around for those lucky enough to have kept working, the same people who could probably work from home and are now considering a move, the answer is probably yes, for now.”
