In news that will interest buy-to-let landlords, the typical property price in the UK marginally increased by 0.1% in June, according to the latest House Price Index from the Nationwide Building Society, owner of buy-to-let lender, The Mortgage Works.
Chief Economist at Nationwide, Martin Gahbauer, said that the month of June proved broadly stable for the housing market. He added that the price of a typical UK property increased by a seasonally adjusted 0.1% on a month-on-month basis (m/m), having increased by 0.5% in May. The smoother 3 month on 3 month rate of change, meanwhile, marginally increased from 1.7% to 1.8%. House prices in the UK increased by a cumulative 3.0% during the first six months of 2010.
By contrast, he said, for the second month in a row, the annual rate of house price inflation fell from 9.8% to 8.7%, reflecting the quicker pace at which house prices were increasing at the same time twelve months earlier. Gahbauer said that provided that house prices didn’t increase again over the next few months, the annual inflation rate “should” continue to gradually decrease, given the very strong price increases witnessed during summer 2009.
Gahbauer added: “Recent indicators point to an increase in the supply of property coming to the market for sale, perhaps in response to the abolition of HIPs in the opening days of the new coalition government. With the level of demand remaining broadly stable, this would in part help to explain the recent slowdown observed in the rate of house price inflation.”
Gahbauer also commented on what he believed to be the “mixed” impact that the emergency Budget would likely have on the housing market, saying that the most directly relevant policy change was the decision to raise the Capital Gains Tax (CGT) rate from 18% to 28% for higher rate taxpayers. He said that not only was the increase “flagged” well in advance of the 22 June Budget, but that there had been fears of the rate being raised much higher, to as high as 40% or 50%, to bring it into line with higher rates of income tax, therefore making the actual increase look relatively modest.
He added that with regard to the short-term impact on the housing market, the most important aspect of the hike in CGT was the decision to implement the change with immediate effect. He said that had there been a delay in implementation, the likely outcome would’ve been that many of those affected, of which buy-to-let landlords would have been one group, would have chosen to sell their properties early in advance of the tax increase.
However, Gahbauer said that on the grounds that the economy did not “relapse” into recession, there should be a relatively neutral impact on the housing market and prices as a result of the Budget.
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