UK house prices fall in July as tax cut is scaled back
British house prices fell in July after a coronavirus emergency tax break for buyers was scaled back at the end of June but demand for bigger homes as a result of the pandemic is likely to support the market, mortgage lender Nationwide said.
In monthly terms, house prices fell by 0.5 per cent from June, their first fall since March, slowing the annual increase to 10.5 per cent from June's leap of 13.4 per cent which was the steepest rise in 17 years.
Economists polled by Reuters had expected a less marked cooling of the market, predicting prices would rise by 0.6 per cent from June and by 12.1 per cent in annual terms.
Nationwide's chief economist Robert Gardner said the rush to qualify for the full tax break - housing transactions hit a record in June, according to official data - meant savings from the incentive had been dwarfed by the surge in house prices.
Under the incentive scheme, the first 500,000 pounds ($693,850.00) of any property purchase in England or Northern Ireland were exempt from the stamp duty tax until the end of June. A 250,000 pound tax-free allowance is now running until the end of September
Gardner said July's slowdown had been expected after the run-up in prices which rose by an average of 1.6 per cent a month over the April-to-June period, more than six times the average monthly gain during the five years before the pandemic.
"Underlying demand is likely to remain solid in the near term," he said.
Improved consumer confidence, low borrowing costs and a shortage of homes on the market would provide support for house prices despite an expected rise in unemployment as the government scales back its pandemic jobs support programme.
"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," Gardner said.