Taylor Scott International News
Residential property prices in the UK edged upwards by just 0.2% in May in the run up to the historic vote on the future of the country in the European Union, according to the latest index. This meant that annual price growth slowed to 4.7%, taking the average price to £204,368, but activity in the market is expected to slow in the coming months due to a spike in March due to stamp duty changes and now the Brexit vote. Robert Gardner, Nationwide's chief economist, pointed out that the annual pace of house price growth remains in the fairly narrow range between 3% and 5% that has been prevailing for much of the past 12 months. ‘In the near term, it’s going to be difficult to gauge the underlying strength of activity in the housing market due to the volatility generated by the stamp duty changes which took effect from 01 April,’ he said. ‘Indeed, the number of residential property transactions surged to an all-time high in March, some 11% higher than the pre-crisis peak as buyers of second homes sought to avoid the additional tax liabilities,’ he explained. He also pointed out that while cash purchases accounted for a significant proportion of the increase in activity it is not possible to determine whether or not these were purchased by landlords. Mortgage data suggests that, while buy to let purchases were a major driver of the increase, the purchase of second homes also accounted for a substantial proportion. The number of home mover mortgages, which is where second home purchases with a mortgage would show up, increased sharply in March. ‘House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the buy to let sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag,’ said Gardner. ‘Nevertheless, healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty related volatility has passed, providing the economic recovery remains on track,’ he added. ‘However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,’ he added. Gardner also explained that it is difficult to gauge how sentiment from overseas buyers will be impacted by increased economic uncertainty caused by Brexit on the one hand and the sharp decline in Sterling on the other, which, if sustained, reduces the cost of UK property in foreign currency terms. He pointed out that property prices in London have been supported by extremely robust labour market conditions as well as strong investor demand in recent years. Indeed, the price of a typical London property… Taylor Scott International
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