The rate house prices are rising has slowed ahead of the EU Referendum with greater uncertainty expected from the Brexit vote.
Halifax have reported a slowdown in the growth of their annual house price index reducing from 9.2% to May last year to 8.4% this year with the average cost of a UK home now at £216,823.
The continued rise in house prices means first time buyers would require a larger deposit or higher earnings to purchase their first home.
According to Martin Ellis Halifax housing economist, house prices in the three months to June were 1.2% higher than in the previous quarter, down from 1.5% in May.
House prices continue to increase at a slower rate although this precedes the EU referendum Brexit result and therefore it is far too early to determine any impact since.
Nationwide report stable growth
The house price index from Nationwide reported annual growth has remained stable with the annual rise at 5.1% to June compared to 4.7% the previous year.
Over a month the growth rate is unchanged at 0.2% with the average cost of a UK home slightly lower than the Halifax at £204,968.
Robert Gardner Nationwide’s Chief Economist said, it has become difficult to gauge the underlying pace of demand due to the surge in house purchases in March before the new Stamp Duty tax in April.
The tax increased to an additional 3% of the purchase price and applied to homeowners buying second homes and buy-to-let landlords.
The following table shows how this is changing:
| Property Values | Standard rates | Buy-to-let rates |
|---|---|---|
| Up to £125,000 | 0% | 3% |
| £125,000 – £250,000 | 2% | 5% |
| £250,000 – £925,000 | 5% | 8% |
| £925,000 – £1.5m | 10% | 13% |
| over £1.5m | 12% | 15% |
As buyers brought forward purchases to avoid the additional stamp duty tax Mr Gardner said there would be a fall back in transactions in the quarters ahead as well as increased economic uncertainty following the referendum result.
However, estate agents are reporting a record low number of properties on the market and this will provide underlying support for prices even if demand softens.
London growth remains robust
The Nationwide data shows the South East with the strongest annual growth in the country with property prices up 12.4% with London in second up 9.9%.
With rising prices and reduced supply of suitable properties for home movers, more remortgage buyers are remaining in their existing home and saving for a bigger deposit.
London property prices are 54% higher than before the financial crisis in 2007 compared to only 10% for the UK as a whole.
The rise in London house prices allows the older equity release buyer to access cash in their homes with a lifetime mortgage, using this for any purpose such as home improvements or holidays.
The rapid rise in house prices means home movers will find the gap between their current home and the next increases requiring a larger mortgage or deposit.
The outlook for London is more difficult to assess, says Mr Gardner as both buy-to-let landlords and overseas investors play a larger role in the market.
Employment in the Capital is extremely robust and 17% higher than the pre-crisis peak although it remains uncertain how the Brexit vote could impact the city.
According to Nationwide the average London property price is at a record high of £472,384 and 12 times the average earnings in the capital.
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