UK House Prices to Start Growing in July

Nationwide Building Society, a mortgage lender in UK, said that house prices will start growing in July. Last month, the annual growth rate of house prices was 3.5%, but according to Nationwide, the property market has begun stabilizing.

The average price of houses in the UK is getting closer to £200,000 because of increased growth rate in July. While June showed a decline of 0.2%, July presented a month-on-month increase of 0.4%. Property prices increased by 3.5% last year while compared to the annual increase of 3.3% reported till June this year.

Currently, a house in the UK costs an average £195,621, which is slightly more than its June cost of £195,055. But Nationwide says that growth of house prices is going to stabilize at 4%.

Robert Gardner, the chief economist for Nationwide, said:

This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand.

He further said that demand for houses has remained encouraging as growth in employment opportunities has been quite steady in the last few financial quarters. Wage growth, which was rather subdued for a long time, is finally picking up. Nationwide feels that demand for houses is going to increase in the near future owing to all these factors, especially as mortgage rates are “still close to all-time lows.”

Gardner also said that it is not clear if the supply will match the demand although the number of under-construction houses is rising.

The UK property market has been affected by changes in stamp duty, which require buyers of houses to pay taxes as per a new tiered-rate system. The original flat-rate system is now no more. Home buyers have welcomed these tax changes. According to Gardner, as many as 235,000 buyers of houses in Wales and England have paid less stamp duty. Home buyers in South England have benefited the most as the average price of houses is highest there.

Nationwide says that buyers have paid £275m less tax because of the changes in stamp duty. Although houses are more affordable now in the UK, stabilizing prices have put property firms in trouble. LSL Property Services recently announced an 80 percent decline in its pre-tax profits during the first six months of this year. The property firm says that its profits have fallen because of changes in stamp duty, higher investment, and market conditions.