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Halifax: house prices hit record high but annual growth cools

ended 06. September 2021

House prices hit a record high in August, according to the Halifax. That said, the annual rate of price growth continued to cool down, at just 7.1%. 

Regionally, London is the laggard, according to the lender, with Wales leading from the front. Key takeaways:

  • Average UK property price now £262,954, highest on record
  • Annual house price inflation slows further to 7.1%
  • Wales remains strongest region or nation, London continues to lag

Russell Galley, Managing Director, Halifax, said:

“Much of the impact from the stamp duty holiday has now left the market, as highlighted by the drop in industry transaction numbers compared to a year ago. However, while such Government schemes have provided vital stimulus, there have also been other significant drivers of house price inflation.

“We believe structural factors have driven record levels of buyer activity – such as the demand for more space amid greater home working. These trends look set to persist and the price gains made since the start of the pandemic are unlikely to be reversed once the remaining tax break comes to an end later this month.

“Price gains of the pandemic unlikely to be reversed” - Russell Galley, Halifax

Galley continued:

“Moreover, the macroeconomic environment is becoming increasingly positive, with job vacancies at a record high and consumer confidence returning to pre-pandemic levels. Coupled with a supply of properties for sale that looks increasingly tight, and barring any reimposition of lockdown measures or a significant increase in unemployment as job support schemes are unwound later this year, these factors should continue to support prices in the near-term.”

The views of the Newspage community of property market experts are listed below.

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9 responses from the Newspage community

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"Over the past year otherwise sensible people lost their heads and, in many cases, have been spending an extra £100,000 on a property so that they could save £15,000 in Stamp Duty. When the furlough scheme ends, if people cannot find new jobs, we could see prices coming down in vulnerable areas. The stamp duty holiday was another example of policymakers artificially inflating house prices. If they really want to help first-time buyers to purchase, this was not the way to do it. The government needs to fundamentally rethink its strategy on home ownership."

"Government interference always results in artificial and distorted markets, which is exactly what we're dealing with now. The stamp duty holiday was unnecessary given the amount of time people had been locked away for. Also, due to COVID, people's desires and requirements for property have changed and that was enough of a driver of transactions in itself. "The property market is robust due to insanely low interest rates and a lack of quality homes for people to buy. With demand for homes so robust and supply on the ropes, it's hard to see prices falling. While there may be an increase in unemployment when the furlough scheme has ended, the chronic shortage of labour caused by Brexit in some sectors could offset this."

"The biggest driver of prices right now is demand constantly outstripping supply. With people living much longer and not enough suitable properties being built for an ageing population such as bungalows, the result is a logjam within the property market. The stamp duty holiday simply inflated price tags to sometimes ridiculous levels, which was not needed if the aim was to help first-time buyers. Prices in prime areas will continue to rise but not at a rapid rate as people are now going back on holiday and spending money on other things so buyers will be more cautious in what they are prepared to pay."

"Just like that annoying kid who always does well at school, property prices seem to be maintaining their momentum. Even the end of furlough and the Stamp Duty Holiday will not dampen the rampant endeavours of the property market for the rest of the year due to low interest rates and the lack of stock available for sale. Overall, the UK economy continues to hold up pretty well and a growing number of overseas investors see UK bricks and mortar as a safe haven compared to investment abroad."

"The stamp duty holiday injected pure rocket fuel into the property market, working first-time buyers and home movers alike into a buying frenzy to avoid losing out on a saving of up to £15,000. Whilst the pandemic changed many homeowners' views of what they need from a property, the other main driver of property prices has been record-low interest rates. With long-term fixed rates below 1%, borrowing an extra £100k might only cost a further £83 a month, making it all too tempting for buyers to get sucked into bidding wars for desirable properties."

Was the Stamp Duty holiday always less important than the fact that the pandemic has changed what we want from property? - Buyers accept that SD has to be paid, sadly the SD figure has been used by Estate Agents as the new 'bargaining ground' between sellers and buyers. Are prices going to continue to rise during the rest of the year and next? - In short no, people are now able to visit places again and so their focus will shift from home life to being out and about. Is the property market going to go completely tits up if unemployment starts to rise when furlough ends? - No, providing people have not purchased property at their maximum borrowing and hopefully everyone has income protection insurance What are the key drivers of the market (and rising prices) right now? - In my opinion Estate Agents have been short sighted. They have added SD to house values and won clients by offering to sell their property for higher than a competitor. In doing so the local buyers are prevented from buying, and instead the 'city buyers' move in. Thus creating a spider web effect as the cities empty of residents. What drove the market in my opinion is residents having time to review the use of their property, be it to sell or renovate. However as per my previous note, buyers and sellers I believe have not secured good value as they have rushed (or been rushed) into transacting.

"There are a number of factors that have combined to play a part in driving the property market upwards. It is difficult to distinguish which element is having the biggest impact but it certainly looks like the stamp duty relief is not solely responsible and changes in buyer preference are also spurring on activity. As we start to return to normality, it will be interesting to see if the preference for property outside of cities with garden space continues or if it was a short-term reaction to Covid and there will be a gradual move back towards city living for shorter commutes."

"Finding a new property is like trying to find a Labrador puppy that's not 5x its normal price. Though prices won't continue to rise at their current rate, the extreme lack of supply means they won't crash either. We're likely to see prices plateau with any growth being marginal in the months ahead. With the furlough scheme coming to an end, and the possibility of many people facing unemployment, lenders are fighting to get lower risk home buyers on their books with a flurry of products now below 1%. These ridiculously low mortgage rates will keep people buying and keep the market moving, if not at the same pace as the past year."

"Factors driving the property market right now include the staggeringly low mortgage rates that are available for low-risk customers, the Government schemes that have created options for first-time buyers, and people continuing to rethink their housing needs after living and working through a pandemic. Demand outstripping supply has always been a factor as well, and will likely remain so indefinitely. It's unlikely that house prices will continue to rise exponentially as the end of the stamp duty relief and a potential increase in unemployment could slow them down. A major slump between now and this time next year is improbable since the housing market has proven resilient throughout the pandemic and demand outstripping supply is always going to keep prices up."