House price growth slows as housing market cools

House prices in the UK grew by 7.6% in the year to July compared with 8.7% a year ago, indicating that the market may be cooling slightly.

According to UK lender the Halifax, the cost of the average UK home is currently £261,221. with the highest rises of 13.8% seen in Wales and the lowest just 2.5% in London. The lender said it expected prices to settle further after the recent spate of strong rises, which has been fuelled in part by tax breaks on stamp duty.  However, it also said that a shortage of homes was likely to support prices.

The stamp duty holiday saw government giving home buyers a temporary break from paying the set tax paid on some housing transactions. It completely waived the payment on the first £500,000 of any property purchase in England or Northern Ireland, but that break finished at the end of June.

From July 2021 onwards purchasers pay 5% tax at £250,000 for properties up to £925,000 and a higher rate on those priced above.  From October, rates are due to return to normal, which means the point at which homebuyers start paying stamp duty will revert back to £125,001.

Russell Galley, managing director of Halifax, said: “This easing was somewhat expected, given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown and with activity supported by the start of the stamp duty holiday.”

Russell Galley, managing director of Halifax, said: “This easing was somewhat expected, given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown and with activity supported by the start of the stamp duty holiday.”

He also said that estate agents had seen a fall in the number of available homes and that this general lack of supply could help to support prices in the near-term. He said other factors such as the low cost of borrowing and continuing strong customer demand also affected the market.

A spokesperson from the estate agent group Fine & Country supported the view that strong demand remained and was expected to continue in the Autumn, commenting, “This data shows the era of ballooning house prices is not over yet, even if a little air is now slowly starting to hiss out of the market. While annual growth has softened slightly since the frenzied heyday of the stamp duty holiday, there is still a great wall of money coming into the market despite the phasing out of this much celebrated tax break.”