House price inflation slows after stamp duty increase
House price inflation slowed in May to a rate of 4.7% a year as second home buyers and landlords fell out of the market, according to Nationwide Building Society, but it added that a more prolonged slowdown is unlikely.
The monthly increase in May was 0.2%, the same as April, helping to cut the annual rate from 4.9%. The average price for a home in the UK is now £204,368.
Investors in the buy-to-let and second home sectors rushing to beat April’s stamp duty increase drove up demand in March, which has since dropped substantially.
Robert Gardner, Nationwide’s chief economist, said: “In the near term, it’s going to be difficult to gauge the underlying strength of activity in the housing market due to the volatility generated by the stamp duty changes that took effect from 1 April.”
The number of residential property transactions surged to an all-time high in March, about 11% higher than the pre-crisis peak, said Gardner.
“House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead.”
Estate agents were cheered that the post-stamp duty slowdown was less than they feared.
Jeremy Leaf, a former chairman of the Royal Institution of Chartered Surveyors (RICS) and a north London estate agent, said: ‘The slowdown in price growth is not as bad a comedown as one might expect following the rush from landlords and second homebuyers . The figures are also indicative of a relatively strong underlying market.”
Total mortgage lending grew by just £281m in April, compared to the £7.4bn rise in March, the lowest increase since August 2012. New mortgage approvals dropped to 66,250 in April, down from 70,305 the month before.Separate data from the Bank of England showed that mortgage lending slowed dramatically in April after booming in February and March.
Howard Archer of IHS Global Insight said: “The strong suspicion is that housing market activity will be pressurised in the immediate term by a combination of weakened interest from the buy-to-let and second home sectors as well as heightened concerns and uncertainties over the UK economic outlook, particularly in the run-up to June’s referendum on EU membership.
“Consistent with this, the RICS reported the first fall in buyer enquiries in April since March 2015. Furthermore, buyer enquiries fell at the fastest rate since August 2008. Consequently, house prices are likely to be soft for the next few months.”
No comments:
Post a Comment