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House prices continue to surge upwards

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House prices surged upwards by a further 2.1 per cent in August, putting the countrywide average cost of a house at £249,000, the Nationwide has reported.

Its latest house price survey puts the annual rate of house price inflation at 11 per cent, 0.5 per cent up on July – the Nationwide survey for July suggested prices had slipped back between June and July.

‘The bounce-back in August is surprising because it seemed more likely that the tapering of stamp duty relief in England at the end of June would take some of the heat out of the market’, commented Nationwide chief economist Robert Gardner.

Moreover, the monthly price increase was substantial – at 2.1 per cent, it was the second largest monthly gain in 15 years (after the 2.3 per cent monthly rise recorded in April this year).

‘The strength may reflect strong demand from those buying a property priced between £125,000 and £250,000 who are looking to take advantage of the stamp duty relief in place until the end of September, though the maximum savings are substantially lower (£2,500 compared to a maximum saving of £15,000 on a property valued at £500,000 before the stamp duty relief in England tapered).

‘Lack of supply is also likely to be a key factor behind August’s price increase, with estate agents reporting low numbers of properties on their books’.

Garner said he expects short-term demand to remain solid now that consumer confidence has returned. ‘This, combined with the lack of supply on the market, suggests continued support for house prices. But, as we look towards the end of the year, the outlook is harder to foresee. Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September’.

Nationwide reported it had started to include energy efficiency ratings from energy performance certificates among property characteristics data.

Analysis suggested ‘that, for now at least, energy efficiency has only a modest influence on house prices for owner occupiers, where an impact is only really evident for the best and worst energy efficiency ratings’, said Gardner.

‘Our analysis suggests that a more energy-efficient property (rated A or B) attracts a modest premium of 1.7 per cent compared to a similar property rated D – the most commonly occurring rating. There is little difference for properties rated C or E compared with D, as shown in the chart in the attached.

‘There is a more noticeable discount for properties rated F or G – the lowest energy efficient ratings. Indeed, an F or G rated home is valued 3.5 per cent lower than a similar D rated property’.