Pace of house price growth slows in July
UK house prices recorded their fifteenth successive monthly increase in July – but the pace of growth slowed, according to the latest house price index from Nationwide.
The price of a typical home increased by just 0.1% over the month, while the annual rate of price growth moderated to 10.6% from 11.8% in June, which Nationwide’s Chief Economist said was ‘not entirely unexpected’ given the drop in mortgage approvals and new buyer enquiries. Commenting on the figures, Robert Gardner, Nationwide’s Chief Economist, said: “At least part of the slowdown in activity relates to the introduction of Mortgage Market Review measures. The modest rebound in mortgage approvals in June adds weight to the notion that the slowdown will prove temporary, though the underlying pace of demand remains unclear. With the labour market strengthening, mortgage rates expected to remain low and consumer confidence rising, activity is likely to recover in the months ahead. “Over the longer term, the trajectory of house prices will remain crucially dependant on supply side developments. While there have been some encouraging signs that construction activity is picking up, the pace of home building continues to run far below most estimates of what would be required to keep up with household formation in the years ahead. “A modest recovery in the number of housing transactions, a pick-up in house price growth and the introduction of higher stamp duty rates on more expensive properties have all contributed to a sharp increase in stamp duty revenues in recent quarters, the majority of which is paid on residential property transactions. “Indeed, stamp duty revenues are near the all-time highs recorded in 2007/08, reaching over £10 billion in the twelve months to June 2014. “Variation in house prices have a strong impact on how much stamp duty is paid across different regions of the UK, with some regions contributing a much greater share of the total stamp duty revenues than their share of housing transactions might suggest. “We estimate that London contributed around 42% of the total stamp duty paid on residential properties in 2013/14, even though the capital only accounted for c.15% of house purchase transactions. This largely reflects the substantial (and growing) gap between house prices in the capital and the rest of the UK, where the typical London home now costs more than twice the national average. “By contrast, the North West, where the price of a typical house is well below the national average, accounted for 3% of the total stamp duty paid, markedly less than its 10% share of property transactions.”
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