By - Annual house price growth rises to 13.4%, the highest level since November 2004
- Prices up 0.7% month-on-month, after taking account of seasonal factors
- Northern Ireland sees strongest growth in Q2, Scotland the weakest, closely followed by London
Monthly Index*
Jun 21 – 486.8 / May 21 – 483.5
Monthly Change*
Jun 21 – 0.7% / May 21 – 1.7%
Annual Change
Jun 21 – 13.4% / May 21 – 10.9%
Average Price (not seasonally adjusted)
Jun 21 – £245,432 / May 21 – £242,832
* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)
Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said:
“Annual house price growth accelerated to 13.4% in June, the highest outturn since November 2004.”
“While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum.”
“Indeed, June saw the third consecutive month-on-month rise (0.7%), after taking account of seasonal effects.”
“Prices in June were almost 5% higher than in March.”
“Regional data for the three months to June indicates that all parts of the UK saw an acceleration in annual house price growth.”
“Northern Ireland and Wales saw the largest gains, at 14% and 13.4% respectively in Q2.”
“By contrast Scotland saw the weakest rate of annual growth, at 7.1% closely followed by London at 7.3% (see page 4 for more regional data and analysis).”
Mortgage payments still affordable – deposit the major hurdle for most first time buyers
“Despite the increase in house prices to new all-time highs, the typical mortgage payment is not high by historic standards compared to take home pay, largely because mortgage rates remain close to all-time lows – in fact, on this measure affordability remains broadly in line with its long run average, as shown in the chart below.”
“However, house prices are close to a record high relative to average incomes.”
“This is important because it makes it even harder for prospective first time buyers to raise a deposit. For example, a 10% deposit is over 50% of typical first time buyer’s income.”
“A potential buyer earning the average wage and saving 15% of take home pay would now take five years to raise a 10% deposit.”
“The improving availability of mortgages for those with a small deposit (and the continued availability of the government’s Help to Buy equity loan scheme) is helping some people over the deposit hurdle, but it is still very challenging for most.”
Outlook clouded beyond the near term
“Underlying demand is likely to remain solid in the near term as the economy unlocks. Consumer confidence has rebounded while borrowing costs remain low.”
“This, combined with a lack of supply on the market, suggests further upward pressure on prices.”
“But as we look toward the end of the year, the outlook is harder to foresee.”
“Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the strong incentive for people to bring forward their purchases to avoid the additional tax.”
“Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down.”
“But even this is far from assured.”
“Even if the labour market does weaken, there is also scope for shifts in housing preferences as a result of the pandemic to continue to support activity for some time yet.”
House price growth up in all regions in Q2
“There was a considerable pick up in overall UK annual house price growth in Q2 and all regions saw an increase in their annual growth rate.”
“Northern Ireland was the strongest performing region, with prices up 14% year-on-year, the highest rate of growth since 2007.”
“Wales also saw a significant acceleration in annual house price growth to 13.4%, the largest rise since 2005.”
“But conditions were more muted in Scotland, which saw a modest increase in annual growth to 7.1% (from 6.9% last quarter) and was also the weakest performing part of the UK.”
“This may reflect that the stamp duty (LBTT) holiday in Scotland ended on 31 March.”
“England saw annual house price growth increase to 9.9%, from 6.4% in the first quarter of the year.”
“Within England, Yorkshire & Humberside was the strongest performing region, with prices up 13.0% year-on-year.”
“This is the strongest price growth seen in the region since 2005 and pushed average prices to a record high of £183,982.”
“Both the East and West Midlands saw annual price growth rise to 12.2% in Q2. Meanwhile in the North, prices were up 11.2% year-on-year.”
“London was the weakest performing English region, though still saw a pickup in annual price growth to 7.3%, from 4.8% last quarter.”
The surrounding Outer Metropolitan region, which includes places such as Luton, Watford, Sevenoaks and Woking, saw annual price growth rise to 8.2%.”
“Meanwhile, house price growth in the Outer South East region, which includes cities such as Brighton & Hove, Oxford, Winchester and Southampton, increased to 10.9%, the first time the region has seen double digit growth since 2014.”
“And in the South West region, annual house price growth reached its highest level since 2010, with prices up 10.4% year-on-year.”
Founder and CEO of GetAgent.co.uk, Colby Short, commented:
“Properties are going under offer at an alarming pace at the moment and buyers continue to swarm the market despite the dwindling hopes of a stamp duty reprieve.”
“There also remains a severe shortage of stock to meet this demand and so sellers are achieving a very good price for their property, often at, or in excess of the original asking price.”
“While a reduction in buyer demand is expected towards the back end of this year, the scales will remain firmly tipped in favour of buyers due to the imbalance between supply and demand and so we should see a buoyant level of property price appreciation remain for the duration of the year.”
Director of Benham and Reeves, Marc von Grundherr, commented:
“We’re currently seeing huge rates of house price growth not seen since some time before the last property market crash.”
“There’s no end in sight where this current market performance is concerned, despite some having predicted a market slump on and off since the pandemic first started.”
“It’s important to remember that while the market did show signs of slowing down as we approached the original stamp duty deadline, we’re now looking at a very different market altogether.”
“People are returning to work and life is gradually returning to a greater sense of normality and so the stimulation of a stamp duty saving is no longer required in order to maintain market activity.”
“London, in particular, is showing strong signs of a shift in momentum across both the rentals and sales market.”
“This is being driven by a realisation that we can’t work from a secluded countryside bolthole forever and now that we are returning to the workplace, a lengthy commute on a stuffy train is no longer as manageable when it’s required five days a week instead of one or two.”
Managing Director of Barrows and Forrester, James Forrester, commented:
“The stamp duty holiday isn’t the be-all and end-all where homeownership is concerned and it certainly isn’t the primary factor causing buyers to enter the market at mass.”
“So its tapered expiry is unlikely to cause current levels of market activity to evaporate overnight.”
“Once both the initial and extended deadlines have expired, the fires of buyer demand will continue to be stoked by the availability of 95% mortgage products and very low interest rates.”
“Of course, there will be some period of natural market realignment after such a sustained period of manic activity, but we’re worlds away from seeing a property market crash.”
Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented:
“It’s crunch time for the UK market and we can expect to see a far less positive outlook from here on out where house price appreciation is concerned.”
“For far too long, homebuyers have been borrowing beyond their means and offering above the odds in a desperate scramble to secure a stamp duty holiday saving.”
“Now that this is starting to slip through their fingers we will see a reduction in transaction levels and the inevitable decline in property prices that will soon follow.”
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