House prices rose 2.8 per cent between May and June
UK house prices increased by 3.4 per cent in the 12 months to June, compared to an annual rise of 1.1 per cent in May, the UK House Price Index revealed.
Month on month, house prices rose on average 2.8 per cent between May and June.
Regionally, the East Midlands saw the greatest annual price rise of 4.5 per cent while the North East saw the lowest annual price growth with a rise of 1.7 per cent.
Shaun Church, director of Private Finance, said: These latest figures reveal the scale of the impact that the sudden burst in pent-up demand had on house prices following the reopening of the property market.
He said, price rises were driven by a flood of buyers resuming purchases put on hold during lockdown immediately after restrictions were eased. Initial strong demand has been boosted by the higher stamp duty threshold coming into effect in July.
Around 150,000 housing transactions were put on hold in March and restarted again in June, according to the Centre for Economics and Business Research (CEBR).
However, Church expects the strong market activity to be short lived.
An uptick in infections and mounting concern over the reintroduction of national and local lockdowns is weighing on consumer confidence, he said. This could cause buyer activity to dip, resulting in the market readjusting to a new economic environment.
Church said, lenders are taking a risk-averse position in response to high uncertainty levels in the UK economy. Mortgage providers are increasing rates on higher loan-to-value products to reduce exposure to riskier borrowing propositions. Unfortunately, this will create barriers to entry for first-time buyers, the group of people that have been hardest hit financially by the pandemic.
It is widely expected that the property market will experience a downturn next year.
CEBR forecast a 14 per cent drop in house prices in 2021. In its latest report, the Intermediary Mortgage Lenders Association said the policy decisions lenders made now about loan to value restrictions would affect the severity of a downturn next year.
However, estate agents say they are no signs yet of the market slowing down.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: Although a little historic, these figures highlight the resilience of the property market and the strength of pent-up demand even as we were recovering from lockdown and before the announcement of the stamp duty holiday.
Leaf says, this comprehensive survey reflects prices paid for property and so is an indicator of some optimism. We are being told repeatedly that this mini-boom will not continue as the job retention scheme unwinds and unemployment rises but we are not seeing many signs of that on the ground. If anything, the market is being more restrained by lender caution and lack of capacity to deal with the number of enquiries rather than demand fizzling out.
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