Property prices slipped by 0.1% in August

The most recent report from Nationwide reveals that there was a 0.1% fall in UK property prices during August.

Year-on-year growth slowed to 2.1% from the 2.9% seen in July.

Stamp Duty Revenues

In addition, the report from the lender indicates that Stamp Duty revenues have hit all-time highs in cash terms, reaching £12.8bn in the 12 months to Q2 2017. This was well above the £10.6bn peak seen in late 2007.

Robert Gardner, Chief Economist of Nationwide, suggests the 2%-3% house price slowdown seen in recent months, instead of the 4%-5% seen in 2016, is representative of a cooling market and overall economy.

Mr Gardner pointed out that the economy rose by 0.3% in the first half of 2017- roughly half the pace recorded during 2016.

‘Nevertheless, in some respects the slowdown in the housing market is surprising, given the ongoing strength of the labour market. The economy created a healthy 125,000 jobs in the three months to June and the unemployment rate fell to 4.4%, the lowest rate for over 40 years. In addition, mortgage rates have remained close to all-time lows,’ Gardner explained.

‘It may be that mounting pressure on household finances is exerting a drag. Wages have been failing to keep up with the cost of living in recent months and consumer sentiment has weakened. While measures of housing affordability are not particularly stretched at a UK level, pressures are evident in some regions, especially London and the South of England,’ he continued.[1]

Property prices slipped by 0.1% in August

Property prices slipped by 0.1% in August

Stamp Duty

Gardner went on to say that, ‘constrained supply is likely to continue to provide support for house prices. The stock of homes on estate agents’ books remains close to 30 year lows and the number of new homes coming onto the market remains subdued. As a result, we continue to expect prices to rise by around 2% over 2017 as a whole.’

Jonathan Samuels, Chief Executive Officer of property lender Onctane Capital, also noted that the cooling of the housing market is little surprise, when factoring in the impact of increased inflation, low wage growth and ongoing consumer uncertainty surrounding Brexit.

Samuels said: ‘Essentially, people are feeling the pinch and that will always impact property prices. But the property market can only cool so much given the ongoing lack of supply. When there are so few properties for sale and being built, prices can only go so low.

The 3% surcharge on second homes and buy to let properties has been a major driver in surging stamp duty revenues. This has been one of the most fundamental changes to the UK property market for many years and its effects are already evident,’ he pointed out.

‘The punitive level of stamp duty at the higher end of the market has seen this area of the market cool down significantly. So while people are paying more, there have been far fewer transactions. At the higher end of the market, new stamp duty rates have affected countless transactions and so whether this is contributing to increased revenues is open to question.’[1]

[1] http://www.propertywire.com/news/uk/property-prices-uk-dipped-0-1-august-latest-index-shows/

 

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