UK house prices up by 3.5%, while Stamp Duty falls

According to new data from the Nationwide house price index, UK house price growth has risen in July by 0.4%, boosting the annual pace of house price growth to 3.5%.

The New data also revealed that the average house price now stands at £195,621, up from £195,055 in June.

Robert Gardner, Nationwide’s Chief Economist, said: “After moderating over the past twelve months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.

“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.

“The outlook on the demand side remains encouraging. Employment growth has remained relatively robust in recent quarters, and, after a prolonged period of subdued growth, wage growth is also edging up. With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead.

“It remains unclear whether activity on the supply side will catch up with demand. The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.”

The index also shows that stamp duty changes have reduced “bunching” at key price points.

Robert Gardner continued: “The slab structure used to result in significant distortions with a clustering of transactions at the tax thresholds. Under that system, paying £1 more would result in significant additional stamp duty being due (for example, paying £1 over the £250,000 or the £500,000 threshold used to trigger an additional £5,000 of SDLT).

“Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points. Moreover, based on the first six months of transactions data from the Land Registry, nearly 235,000 purchasers in England and Wales have paid less tax under the new regime, with an average benefit of c£1,800.

“The benefits are greatest in the South of England where average house prices are higher. We estimate that around 85% of transactions in London, the South West and South East have benefited from the changes, compared with around 55% in the North, Yorkshire and Humberside, and the North West of England.

“However, we estimate that around 5,000 (2%) of purchasers paid more (two thirds of whom were in London), with an average of £28,000 more tax being paid compared with the old system.

“On balance (considering the net effect of those paying more and those paying less), we estimate that the changes have resulted in around £275m less tax being paid than would have been the case under the old stamp duty regime.”

Source: Property Reporter

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