Economist's view: House prices are still going strong after almost a year of continuous rapid growth
Commenting on today’s ONS HPI figures, Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:
Today’s figures indicate house prices are still going strong, after almost a year of continuous rapid growth, albeit with a slight drop off in pace this month. In the year to July, house prices grew by 8%, compared to 13% in June – a price increase of £19,000 over the last year, which for some is more than their annual earnings. This was also the first month after the Stamp Duty relief threshold was lowered from £500,000 to £250,000.
For many first-time buyers the whole process of realising their dreams of homeownership has become a whole lot more difficult. The price of a typical first-time buyer home has grown by 7.7% year on year to £214,237 in July. If they want to put down a deposit of 10% they now need to save £21,423 compared to £19,318 before the start of the pandemic in February 2020. While some will have benefitted from keeping their jobs and perhaps boosting their savings, others will have been less fortunate. Particularly those who lost their jobs – the unemployment rate for 18-24 age group grew to a peak of 13.8% in December, compared to 5.3% for all age groups. Most of the job losses in the young age group are in low-paid roles and most affected by the lockdown. These workers were already struggling to up their financial resilience and the pandemic may have set them back a bit further.
With housing supply low relative to high demand, we can expect house prices to remain out of reach for many first-time buyers. And if rents also continue to increase, their ability to save up for a deposit will continue to diminish.