Annual house price growth recovered to 1.5% in July 2020, according to Nationwide’s House Price Index.
Prices rose 1.7% compared with June, which had seen a drop of 1.6% on the month before; June’s annual house price change was -0.1%.
The average house price, not seasonally adjusted, was £220,936 in July, compared with £216,403 in June.
Robert Gardner, chief economist at Nationwide, said: “UK house prices rose by 1.7% in July, after taking account of seasonal effects, offsetting the 1.6% fall in June.
“As a result, annual house price growth recovered to 1.5%, from -0.1% last month.
“On a seasonally adjusted basis, house prices in July were 1.6% lower than in April.
“The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.
“The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.
“Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
“Our own research, conducted in May, indicated that around 15% of people surveyed were considering moving as a result of life in lockdown.
“Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this stage.
“These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward.
“However, there is a risk this proves to be something of a false dawn.
Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down.
“If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.
“The temporary increase in the Stamp Duty Land Tax (SDLT) threshold in England and Northern Ireland to £500,000 (until 31 March 2021) should mean that around 90% of owner occupier transactions in England will pay no SDLT over the next nine months.
“The Scottish government has raised the threshold for its equivalent Land & Buildings Transaction Tax (LBTT) to £250,000, which means that 80% of home purchasers in Scotland will pay no LBTT.
“The Welsh government has also raised the threshold for its Land Transaction Tax (LTT) to £250,000.
“First time buyers were already exempt from SDLT on purchases up to £300,000, so these changes have a greater benefit to home movers.
“There is also a significant skew in the beneficiaries towards wealthier households, which are disproportionately in London and the South of England, where average house prices are significantly higher.
“Typical savings are likely to be fairly modest for the majority of buyers in the north of England, Scotland and Northern Ireland.
“In Wales, the previous lower threshold for LTT of £180,000 was already above the average house price in the principality.
“Moreover, some of the stamp duty saving is likely to get passed on in terms of higher house prices.
“The stamp duty holiday is also likely to lead to increased volatility in transactions levels, especially around the end of the holiday, which in the past has led to significant spikes in activity.”
Alan Cleary, group managing director at OneSavings Bank for mortgages, added: “With last month seeing the largest monthly fall in house prices since February 2009, the Chancellor’s announcement of a stamp duty holiday has been a welcome boost for the market. Buyers and sellers who saw their plans put on hold in March have finally been able to make real progress and complete sales.”
“First time buyers have also benefited in recent months with almost a quarter able to save more during lockdown, which when combined with the stamp duty holiday and dip in house prices last month should allow them to come to the market sooner.”
“However, the risk is that this boom in activity will be short-lived. The Chancellor was clear in his statement that the Stamp Duty holiday is only a temporary measure with buyers having to act quickly to make the most of this limited window of opportunity.
“With the continued uncertainty around how the UK economy will recover from the pandemic as the furlough scheme winds down and job losses hit later in the year and the possibility of a second wave, all these factors will play a part in how the market shapes up in the coming months.
“The government’s immediate response to coronavirus has proven to be effective in stimulating transactions but the lack of available housing stock cannot be overlooked. The government needs to align its short and long-term strategies for the housing market to put an end to the cyclical pattern the market currently finds itself in.”