"Buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead."
The average UK property price is now £261,221, up 0.4% in July.
However, while many regions saw annual house price growth slow somewhat in July, reflecting the broader national picture, this wasn’t the case everywhere.
Once again, Wales and the North of England (specifically the North West and Yorkshire & Humberside) continue to lead the way, posting the strongest annual rates of house price inflation, whilst the South West also recorded a double-digit year-on-year rise.
The 13.8% annual increase in house prices in Wales was the strongest growth recorded since March 2005, whilst for Yorkshire the 11% gain was also the highest for over 16 years.
London continues to lag all regions in terms of annual inflation (+2.5%), whilst gains in the South East and Eastern England remain amongst the lowest in the UK.
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. In cash terms, typical prices now stand at just over £261,000, a little below May’s peak but still more than £18,500 higher than a year ago.
“Recent months have been characterised by historically high volumes of buyer activity, with June the busiest month for mortgage completions since 2008. This has been fueled both by the ‘race for space’ and the time-limited stamp duty break. With the latter now entering its final stages (the zero percent rate only applies to the first £250,000 of the purchase price, before reverting back to standard rates from October), buyer activity should continue to ease over the coming months, and a steadier period for the market may lie ahead.
“Latest industry figures show instructions for sale are falling and estate agents are experiencing a drop in their available stock. This general lack of supply should help to support prices in the near-term, as will the exceptionally low cost of borrowing and continued strong customer demand.
“Although there remains some uncertainty over the impact on employment from the unwinding of government support schemes, on balance the risks to the macro-environment are receding, with consumer confidence improving, the labour market recovering, and the economy expanding as restrictions are lifted.
“Overall, assuming a continuation of recent economic trends, we expect the housing market to remain solid over the next few months, with annual price growth continuing to slow but remaining well into positive territory by the end of the year.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "The housing market put in another solid performance in July with annual growth easing slightly as expected given the strength of price inflation last summer when the market recovered from the first lockdown and the stamp duty holiday was announced.
"While government support schemes now need to be unravelled, consumer confidence is improving as restrictions continue to lift. Lenders also remain confident, are highly liquid and have plenty of cash to lend, which should result in continued low borrowing rates to support the market.
"The best mortgage rates are for the equity rich or those with sizeable deposits but we are seeing increasingly competitive pricing at higher loan-to-values as more lenders re-enter that space after pulling out during the height of the pandemic. Funds put aside for bad debts are also now partially being reallocated back to new lending, meaning even more money is available to lend. If lenders are to attract customers they need to go ever lower on pricing, which is why rates continue to fall."
Anna Clare Harper, CEO of property consultancy SPI Capital, added: "The slight cooling off in annual house price growth is not surprising as the boom in values has been directly caused by policies around the pandemic, rather than happening despite Covid.
"Housing transactions and prices were encouraged by the temporary stamp duty reduction, which was designed to boost the housing market and confidence through the pandemic, as well as lockdown-led upsizing and a flight to safer assets. Alongside this, interest rates remain low, which helps to explain why house prices are rising so much faster than wages: money is cheap and accessible.
"The pace of house-price growth has led some commentators to fear a crash. However, demand for housing is still growing, and supply is increasingly constrained. We’re seeing less housing stock on the market in our day to day work, and in the data. And, unless interest rates rise significantly, it’s unlikely that we see a mass sell-off from property owners. Further, land and planning constraints and the growing cost and complexity of construction mean limited supply is likely to continue. We need 340,000 new homes up to 2031 and remain well below this, at around 160,000 each year for the past two years.
"So, it’s likely that the long-term trend will continue: house prices rising faster than most people’s wages. This is backed up by the data: according to Halifax, in July, house prices were £18,537 higher than this time last year, a figure far higher than average wage growth.
"This makes ‘affordable home ownership’ for most younger and less well-off people unlikely, without taking on huge debt or seeking government support."
