United Kingdom house prices experienced their most significant monthly decline in over two years in June, a clear sign that prospective buyers are feeling the pressure after an increase in transaction taxes came into effect in April.
The unexpected drop casts a shadow over the near-term outlook for the UK property market.
According to a report released Tuesday by Nationwide Building Society, one of Britain’s top mortgage lenders, the average cost of a home unexpectedly fell by 0.8% in June, bringing the average price down to £271,619 ($373,270).
This marked the third price decline in as many months and was the largest single monthly drop since February 2023.
The data starkly contrasted with the expectations of economists polled by Reuters, who had forecast a modest 0.1% increase for the month.
The annual rate of house price growth also cooled considerably, falling to 2.1% in June, down from 3.5% recorded in the previous month.
This annual growth figure was also well below the 3.1% expansion that economists had anticipated.
Stamp duty hike and economic headwinds bite
This latest report suggests that a brief boost seen in May’s house price data was short-lived.
Aspiring buyers are now contending with the impact of higher stamp duty taxes, which have added thousands of pounds to the cost of purchasing a home.
The stamp duty thresholds reverted to their pre-2022 levels on April 1, a move that has increased costs for many property buyers and injected volatility into both prices and transaction volumes.
First-time buyers, for example, now start paying the levy on properties worth £300,000 or more, a significant change from the previous, higher threshold of £425,000.
Robert Gardner, Nationwide’s chief economist, directly linked the downturn to this policy change, stating:
The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April.
Beyond the tax changes, Britons appear reluctant to tap into their savings to fund property purchases.
A climate of heightened trade tensions, elevated mortgage rates, and rising costs for essential bills is seemingly eclipsing the benefits of what has otherwise been strong wage growth.
A cautious outlook for the summer
Despite the gloomy June figures, Nationwide’s chief economist offered a cautiously optimistic outlook for the coming months.
Gardner stated that he expects “activity to pick up” from the summer.
He pointed to several underlying strengths in the economy that could support a recovery in the housing market, noting that “the unemployment rate remains low, earnings are rising at a healthy pace in real terms, household balance sheets are strong and borrowing costs are likely to moderate a little”.
However, for now, the sharpest price drop in over two years indicates that the UK housing market is navigating a period of significant pressure, with affordability and buyer confidence being put to the test.
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