3 Minutes to Read (Reuters) – LONDON (Reuters) – House prices in the United Kingdom increased by the most in more than 16 years this month, rising 13.4% from June 2020, and demand is projected to remain strong as long as a coronavirus emergency tax relief is in place, according to mortgage lender Nationwide. Outside of a set of recently built properties in west London, Britain, on November 23, 2017, property sale signs can be seen. TOBY MELVILLE/FILES/REUTERS House prices rose 0.7 percent month over month in May, as buyers raced to take advantage of the tax break and sought larger properties following their experiences with lockdown. On Tuesday, Nationwide’s senior economist Robert Gardner said, “While the strength is largely due to base effects, with June last year notably weak owing to the initial shutdown, the market continues to show substantial momentum.” Prices were predicted to climb by 13.7 percent on an annual basis and by 0.7 percent from May, according to economists polled by Reuters. The tax exemption, which was implemented last year as part of British finance minister Rishi Sunak’s emergency economic aid package, was set to expire at the end of March. However, until the end of June, the first 500,000 pounds ($693,250) of any home purchase in England or Northern Ireland would be tax-free, and a 250,000 pound tax-free allowance will be available until the end of September. “As the economy opens up, underlying demand is expected to stay strong in the near term,” Gardner said. “Consumer confidence is on the rise, and borrowing prices are still low. This, combined with a scarcity of supply on the market, means that prices will continue to rise. However, as we approach the conclusion of the year, the picture becomes more difficult to predict.” Sunak’s massive jobs support program, in addition to the tax holiday, is set to be phased down by the end of September, increasing fears of an increase in unemployment. The shift in demand for larger residences seen during the epidemic could still benefit the market once the tax break is gone, according to Nationwide. According to a poll released by the lender last month, nearly seven out of ten homeowners who were considering a move would do so even if the tax benefit was not extended. House prices are close to a record high in relation to salaries, according to Nationwide, making it difficult for first-time buyers to save for a deposit. However, due to low mortgage rates, mortgage payments were not a large percentage of pay. The Bank of England has stated that it is keeping an eye on the property market as it assesses the likelihood of a broader rise in inflation as the economy reopens. Last week, the Bank of England kept its benchmark interest rate at an all-time low of 0.1 percent and kept its plan to buy 895 billion pounds of government bonds unchanged. Despite evidence of economic recovery in the UK, most Bank of England rate-setters stated that they wished to “lean forcefully against negative risks to the outlook.” House prices in London rose at the slowest rate of any region in England in the second quarter of 2021, according to Nationwide, but they still rose by 7.3 percent. Northern Ireland was the best-performing region, with prices rising 14% year over year. (1 dollar = 0.7212 pounds) William Schomberg wrote the piece, while James Davey and Andrew Heavens edited it. Continue reading
