According to the Office for National Statistics (ONS) UK House Price Index, property prices grew by 10% in the year leading to May 2021.

This was an increase from 9.6% in the previous month.

Property price growth

The average property price in the UK increased in May to £255,000.

Month-on-month growth also increased to 0.9%, from 0.5% April.

A lot of this growth has been attributed to the Stamp Duty Land Tax holiday, of which the threshold lowered at the end of June.

The higher thresholds on tax on property purchases allowed sellers room to request higher asking prices, as the buyers’ overall costs were reduced.

Langley House Mortgages co-founder Robert Payne commented:

“It appears that the stamp duty holiday was more of an added bonus to an already buoyant market rather than the driving force, as there is still an abundance of buyers out there.

“Perhaps the impact of Covid is the main driver behind increased demand as more people work from home and there’s less of a need to live close to cities.

“We have seen a number of Londoners relocating to the South West to take advantage of cheaper house prices and a slower pace of life.”

Regional variance

Average prices rose the most in the North West, where they reach £189,245, an increase of 15.2% a year to May.

The lowest annual growth was in London, where average prices only increased by 5.2% to £497,948.

The North East continued to have the lowest average house price, at £143,000, and surpassed its pre-economic downturn peak of July 2007 in December 2020.

At a country level, Wales recorded the strongest year-on-year growth with prices up by 13.3% to £184,297.

Scotland saw house prices increase by 12.1% to £171,448 and England saw them rise by 9.7% to £271,434.

Impact on landlords

Buyers and sellers in the market have responded to the increases with a tempering in activity, in the last few weeks, waiting to see what the direction of travel is.

Is it likely that house prices will fall back to pre-stamp duty holiday levels any time soon?

It is difficult to judge.  Undeniably the stamp duty holiday has brought forward demand and if the holiday is not extended or replaced with something similar logically the relationship between demand and supply must self-correct, particularly if we also see long term interest rates continue to rise, as this will inevitably lead to an increase in mortgage rates in the short to medium term and thus further dampening demand.

Andrew Turner, chief executive at Commercial Trust gives his view on whether this demand and supply issue is welcome news to landlords.

“I believe it is.  Our anecdotal experience from our main landlord clients is that they have plenty of capital available and are sitting out the market, to wait for the correction that will inevitably follow, from the ending of the stamp duty holiday and the firming of long term rates.

“Coupled with the fallout from the pandemic when many would be homeowners won’t be able to access the mortgage market should mean that property yields will increase, meaning good times lie ahead for all landlords with the appetite to further invest.”

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.