Due to the stamp duty holiday, low mortgage rates and housing shortage, the first six months of 2021 saw house prices reach a record high. However, reports from various house price indices show a slight drop following the stamp duty holiday deadline. Are house prices finally going to go down? I look at the current state of the housing market and the house price forecast for August 2021.
Have house prices dropped after the stamp duty holiday ended?
The UK House Price Index data is considered the most accurate because it is based on completed cash and mortgage sales sourced from HM Land Registry. However, there appears to be a delay in the data being published. The latest update was on 14 July 2021, and we expect the following update on 18 August 2021.
Meanwhile, data from the Nationwide House Price Index, based on its own mortgage approvals, indicates that the average UK house price in July 2021 was £244,229, a modest drop from £245,432 in June 2021. This was a 0.5% drop month-on-month.
Additionally, a report from MoneySuperMarket indicates that general mortgage searches fell by 5.2% between the last 14 days of June and the first 14 days of July.
These figures indicate the end of stamp duty holiday resulted in a modest decrease in demand and house prices.
But wait, there’s more! The impact of the stamp duty holiday may not be the only factor at play. There are still other factors driving house prices up, and they might affect the house price forecast. They include:
- Housing shortage;
- A shift in home-buyers’ needs;
- A rise in home-working, leading to an increase in the number of people moving from urban to rural areas;
- 95% loan to value (LTV) mortgages;
- Lowered mortgage rates.
This might be the reason why we haven’t seen a rapid correction in house prices.
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What’s the current house price forecast?
Reallymoving highlights that though the demand for more expensive properties has decreased modestly, demand for considerably cheaper properties is increasing gradually, and so is the price. This is probably because aspiring buyers are rushing to take advantage of the tapered stamp duty holiday extension.
House prices might, therefore, likely remain high in August 2021. But after the tapered stamp duty holiday extension ends in September, house prices might slowly drop.
Reallymoving’s August 2021 house price forecast indicates a month-to-month slow to +0.4%, with a negative growth of -0.1% in September. The company adds that the highest increase in prices between August and September will be noted in North West England (11.8%), followed by Scotland (9.7%). On the other hand, London is expected to have the smallest increase (0.2%).
Experts believe that for house prices to fall back to normal levels, the government needs to correct the imbalance between supply and demand by meeting the house-building target in rural and urban areas. These houses also need to meet the new home-buyers’ needs – indoor and outdoor space.
Based on the house price forecast, is now a good time to buy a house?
Currently, buying a house means you might pay a higher price but benefit from low mortgage rates, 95% loan to value (LTV) mortgages and the tapered stamp duty holiday extension. However, there’s a chance you might get into negative equity if you plan to sell your property in the short term.
Based on the house price forecast, you could wait until October, after the tapered stamp duty holiday extension ends. Demand may decrease, leading to lower prices. Additionally, the longer you wait, the higher the chances that the government and private sector will have taken significant steps to correct the imbalance between supply and demand.
