Confounding expectations of an easing of house price inflation, prices rose by 2.1% in August, the second largest month-on-month increase in 15 years. This comes despite the maximum savings on stamp duty falling from £15,000 to £2,500.
After a modest fall in July, expectations were that the property market would take a breather following the tapering of the stamp duty holiday, before picking up again early next year. Rather than leveling off, the market accelerated in August.
Record low interest rates, the demand for larger properties, a lack of available stock and the stamp duty holiday have driven prices up by 13% since before the pandemic began.
The race for space continues at the upper end of the market and has been added to by increasing activity in mass market properties - those costing up to £250,000.
Nationwide's numbers for August
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).
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Back to Robert Gardner at Nationwide:
Underlying demand is likely to remain solid in the near term. Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices. But, as we look towards the end of the year, the outlook is harder to foresee. Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.