The 2.1% rise over the month reported by the Nationwide House Price Index has taken the property industry by surprise as it comes only a month after the winding down of the Stamp Duty Holiday.
The chief economist at Nationwide, Robert Gardner, said the building society had expected the heat to be taken out of the property market when ‘nil rate’ on stamp duty for the first £500,000 of the purchase price was reduced to £250,000 on 30 June.
And, indeed, house price growth dipped slightly in July to 10.5% according to Nationwide’s figures.
So, the 11% annual house price growth recorded in August had not been quite what the experts had predicted.
Robert Gardner explained: “The bounce back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market.
“Moreover, the monthly price increase was substantial – at 2.1%, it was the second largest monthly gain in 15 years (after the 2.3% monthly rise recorded in April this year).”
He thought the strength of the market reflected the high demand for properties priced between £125,000 and £250,000 – the price bracket for which the stamp duty holiday remains in place until 30 September.
“Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books,” he added.
Predictions blown up
Many in property industry had predicted a slowdown of the market during the summer months in the lull following the stamp duty holiday storm. As such, even the estate agents were surprised by the upturn.
Nicky Stevenson, managing director at national estate agent group Fine & Country, was among them. She said: “This latest spike is stunning given that most analysts expected prices to decelerate as the stamp duty holiday entered its final throes going into the autumn.
“Those forecasts have now all proved wrong, and after a bumper summer which featured record borrowing, growth in Britain’s housing market still shows no sign of dampening.”
First-time buyers and investors
Nicky said it was currently first-time buyers and buy-to-let investors who were driving the market.
“It is these sectors that continue to power double digit growth across the country,” she added.
“Based on this latest data, the market may well be running red-hot for some time to come, fuelled by low cost of borrowing, shrinking housing supply and government incentive schemes for first time buyers.
“The boom goes on.”
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