Britain's house price boom shows some sign of cooling but concerns persist  

Market is being spurred on even further by Rishi Sunak's Covid tax incentive for buyers
Britain's house price boom shows some sign of cooling but concerns persist  

Britain's housing market boom showed some signs of cooling in June as prices fell in monthly terms for the first time since January ahead of the scaling back of a tax break for buyers, mortgage lender Halifax said. 

Prices were 0.5% lower than in May, Halifax said. In annual terms, they stood 8.8% higher than in June 2020 after leaping by the most in 14 years in May when they rose 9.6%.

"It is important to put such a moderate decrease in context, with average prices still more than £21,000 (€24,530) than this time last year, following a broadly unprecedented period of gains," Halifax managing director Russell Galley said.

Last week, rival lender Nationwide said its measure of house prices showed a 13.4% leap between June 2020 and June 2021, the biggest increase in over 16 years.

Tax break boosted housing market 

Britain's housing market has been spurred on by finance minister Rishi Sunak's Covid-19 emergency tax break for buyers many of whom were already seeking bigger properties as they increasingly work from home because of the coronavirus pandemic.

The tax exemption on the first £500,000 of any property purchase in England or in the North expired at the end of June. A £250,000 tax-free allowance will run until the end of September.

Mr Galley said demand from people looking for bigger homes would not fade entirely as the economy recovers and the shortage of properties on the market would also support prices.

However, we would still expect annual growth to have slowed somewhat more by the end of the year, with unemployment expected to edge higher as job support measures unwind, and the peak of buyer demand now likely to have passed. 

Prices in London rose by a below-average 2.9% in annual terms in June, slowing from May. 

All other regions of the UK, except for the Midlands, saw prices rise more quickly than in May. 

History suggests Britain's house price surge could threaten hopes of post-Brexit export-powered growth, if  Mr Sunak uses the housing market to fuel the economy like his predecessors did.

Stoked by his tax break on property purchases and a pandemic-driven rush for larger houses as more people work from home, house prices are rising at the fastest annual rate - at 13.4% in June - since 2004, lender Nationwide says.

Property as a driver of wealth

The housing market holds totemic importance in Britain as a driver of wealth. 

Adjusted for inflation, house prices in Britain have grown since 1980 by more than in almost any other advanced economy, according to the Bank of England.

While the link between the domestic property market and international trade may not seem obvious, over the last 50 years there has been a reliable inverse relationship between house prices and the contribution of trade to economic growth, according to Reuters calculations.

• Reuters

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