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UK house prices at record high: but they could fall by the end of the year, according to Halifax

Summer market is hot as buyers and sellers race to take advantage of the tax break — and reassess their lifestyles after lockdown

Property values have hit a record high for the second month running, as the summer house price boom continues apace.

The stamp duty holiday announced in early July, combined with a post-lockdown surge in properties being put on the market and a widespread reassessment of what people want from their homes, has led to a whirl of activity.

Latest figures from mortgage giant Halifax reveal an average price of £245,747, up 5.2 per cent on a year ago. This is the highest level of price growth since late 2016 in the immediate aftermath of the EU referendum, which was followed by prolonged market stagnation.

Nationwide’s most recent figures also showed house prices rising at their fastest rate in 16 years thanks to the stamp duty holiday, which means buyers can save up to £15,000 in tax until the end of March next year.

Property website Rightmove agrees the tax break has lit a fire under the housing market, with a record number of homes sold within a week of being put up for sale.

What will happen to house prices in 2020?

Going forward, however, the picture remains uncertain. Economic anxiety, the likelihood of a no-deal Brexit, and a looming jobs crisis when the furlough scheme ends next month point to house prices dropping in the medium term.

Russell Galley, managing director of Halifax, said: “Notwithstanding the various positive factors supporting the market in the short term, it remains highly unlikely that this level of price inflation will be sustained.

“The macroeconomic picture in the UK should become clearer over the next few months as various government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent.

“Rising house prices contrast with the adverse impact of the pandemic on household earnings and with most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices in the medium term.”

Knight Frank forecasts a 15 per cent drop in home sales this year and expects “muted” price growth in the second half — although it predicts regional markets will be stronger than London.

However, the estate agent distinguishes the coronavirus crisis from the 2008 financial crash, saying that political uncertainty and stamp duty changes have kept house price inflation in check in recent years, meaning there is more scope for prices to rise.

Can I get a mortgage after lockdown?

A squeeze in mortgage availability is also likely to have a dampening effect on house prices as a growing number of buyers find themselves locked out of the market.

This is particularly damaging for first timers, who have made up the biggest group of home buyers in recent years.

Miles Robinson, head of mortgages at online broker Trussle, said: “First-time buyers in particular are facing increased scrutiny from lenders, tighter criteria and a shrinking range of high loan-to-value (LTV) products.

“The number of 90 per cent LTV mortgage products available has dramatically decreased, with 92 per cent of deals pulled from the market since March this year.

“Alongside this, rising house prices mean first-time buyers will be getting less for their money, presenting a further hurdle to getting on to the property ladder.”

Only eight per cent of agents expect house prices to increase over the next year, according to the latest survey from the Royal Institution of Chartered Surveyors. This indicates flat or marginal house price growth in the coming 12 months, the group said.

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