The recent Halifax House Price Index (HPI) revealed that house prices in the UK have risen by 0.7% in August, surpassing the forecasted 0.4% monthly rise.
If you’ve been following house price indexes over the last year, monthly property price growth is hardly new.
However, what makes this stat particularly interesting is the fact that house prices have continued to rise even as the Stamp Duty Land Tax (SDLT) holiday begins to be phased out.
The SDLT holiday has effectively pushed house prices higher, leading to the average UK house price hitting a record high of £262,954 according, to Halifax.
The rise in prices in August can be attributed to a limited supply of new properties appearing on the market, meaning a rise in competition between buyers for existing homes.
As the dust settles and SDLT holiday comes to an end, the question beckons – will house price growth be long term? And what does the lifting of the SDLT holiday mean for property investors?
The SDLT was a success
With SDLT holiday now entering its latter stages with the upcoming deadline of the 1st October – the date that it will revert back to standard rates, there is some uncertainty surrounding the future of the market from critics.
Many have alluded to a crash, or at a minimum a sharp correction and a drop in transactions.
Whilst there will be a readjustment and price correction as buyer activity eases over the coming months, I believe speculations of a sudden crash is overstated.
Moreover, the expected price correction signals great news for first time buyers.
The stamp duty holiday led to booming house prices, meaning first-time buyers, were priced out of the market.
If the prices start to level off or decline this enables first-time buyers to re-enter the market.
It is also worth noting that first-time buyers can still benefit from SDLT relief on houses priced under £500,000.
Despite the stamp duty holiday providing a much-needed support to the housing industry, the inadvertent impact was the financial exclusion for many first-time buyers.
Ensuring access to new property opportunities
Despite the SDLT holiday coming to an end, property remains a popular asset class for investors, offering capital growth and security in times of volatility.
In my opinion, the holiday has successfully encouraged transactions to occur at a time when so many industries were stagnant.
This has helped the UK economy and demonstrates the importance of residential and commercial property in supporting productivity and wider economic growth.
Simply put, the rate of house price increases over the last year has been remarkable.
One feels it would be a mistake to overlook the role the SDLT holiday has played.
While in many respects an emergency measure as part of the government’s COVID-19 response, the question is whether we should consider a permanent type of property tax reform to ensure the real estate market remains fluid.
This is a question I’m sure Chancellor Sunak will be contemplating over the coming months as the country overcomes the challenges posed by the pandemic.
For now, it will be interesting to see whether house prices will continue to rise over these coming months as the final elements of the SDLT holiday are phased out.
Depending on how this plays out, there could be a bigger discussion to be had about property policy reforms in the UK post-pandemic.
Author: Joe Ashford, founder and non-executive chairman of consultancy firm K4 Global