UK average house prices increased by 8.9% over the year to April 2021, down from 9.9% in March 2021, according to the latest data released by the Office for National Statistics.
Albeit slightly historic, this morning's data revealed that the trend of accelerating house price growth seen in the latter half of 2020 continued into the beginning of 2021, but has slowed to 8.9% in April.
According to the report, average house prices increased over the year in England to £268,000 (8.9%), in Wales to £185,000 (15.6%), in Scotland to £161,000 (6.3%) and in Northern Ireland to £149,000 (6.0%).
Explaining the monthly dip in house price growth, ONS highlighted that On 8 July 2020, the Chancellor of the Exchequer announced a suspension of the tax paid on property purchases with immediate effect in England and Northern Ireland. The suspension came into effect slightly later, on 15 July in Scotland and 27 July in Wales. In England and Northern Ireland, properties up to the value of £500,000 would incur no tax, while the thresholds for Scotland and Wales were £250,000. These changes in the tax paid on housing transactions may have allowed sellers to request higher prices as buyers' overall costs are reduced.
As the tax breaks were originally due to conclude at the end of March 2021, it is likely that this inflated March's average house prices as buyers rushed to ensure their house purchases were scheduled to complete ahead of this deadline. The monthly property transactions statistics published by HM Revenue and Customs (HMRC) show that the seasonally adjusted number of transactions in March 2021 was estimated to be 183,170, the highest on record, but in April 2021 they fell to 117,860 - a fall of 36%.
On 3 March 2021, the Chancellor of the Exchequer announced an extension to the Stamp Duty holiday in England and Northern Ireland until 30 June 2021, after which, the threshold will decrease to £250,000 until 30 September 2021. From 1 October 2021, the Stamp Duty thresholds will revert to what they were before 8 July 2020. The tax holiday for Scotland ended on 31 March 2021. The tax holiday has been extended until 30 June 2021 in Wales.
Regional house price growth strongest in the North East
The North East was the region with the highest annual house price growth, with average prices increasing by 16.9% in the year to April 2021. This was up from 14.2% in March 2021. The lowest annual growth was in London, where average prices increased by 3.3% over the year to April 2021, down from 4.0% in March 2021.
London’s average house prices remain the most expensive of any region in the UK at an average of £492,000 in April 2021.
The North-East continued to have the lowest average house price, at £144,000 and surpassed its pre-economic downturn peak of July 2007 in December 2020.
Nigel Purves, CEO of Wayhome commented: “As ever, these figures prove what we already knew – house prices in the first half of this year rose, and fast. For the next few months though, this data will be playing catch up.
“With the Stamp Duty holiday coming to an end and other government incentives measures starting to taper off, we'll soon learn how hard it will be for aspiring homeowners to get onto the ladder in the post-lockdown market.
“Regardless, now is not the time for inaction. The housing market needs to innovate in order to help reluctant renters move into a property which works for them.”
Tomer Aboody, director of property lender MT Finance, says: "An 8.9 per cent increase in prices isn't surprising considering the levels of demand which we have seen over the past year, combined with cheap borrowing rates.
"While London has seen the lowest growth, this is impacted by the high property prices in the capital and therefore any growth percentage-wise will be lower than in other parts of the country.
"Questions are being asked as to whether this growth is sustainable, but while sellers are trying their luck and achieving record prices, some buyers are happy to pay slightly over market value in order to secure their dream home.
"We have seen a drop in buy-to-let purchases due to solicitors not having the capacity to deal with these and prioritising homeowner purchases before the stamp duty deadline."
Conor Murphy, CEO, Smartr365, comments: “While Q1 demand was driven by buyers rushing to complete before the initial deadline for the tax break at the end of the quarter, April demand will have been steered by those looking to complete before the holiday starts to gradually taper from July.
“With reports suggesting that up to 131,000 buyers are set to miss the stamp duty deadline, it is vital that the industry reflects on how mortgage tech can be used to cut inefficiencies in the homebuying process and help as many purchases over the line as possible. Powerful sourcing tools, one-click DIPs and digital ID verification are just some of the features that reduce the legwork in the application process, leaving advisors with more time to help the growing number of buyers.
“The positive impact of the stamp duty holiday far outweighs any negative impact of the consequential rise in average property prices. The tax break is a powerful initiative as it helps ensure that homeownership remains a viable option for all, rather than just for those who are fortunate enough to rely on gifted deposits. The government should certainly consider how it will continue to level the playing field following the end of the initiative in the autumn.”