House prices are rising at their fastest rate in almost 17 years after a dash to beat a stamp duty holiday deadline in England and Northern Ireland pushed the annual rate of property inflation to 13.2% in June.
Figures from the Office for National Statistics showed the average house price across the UK increased by £31,000 to £266,000 over the past year – or just over £2,500 a month.
House price inflation using Land Registry data stood at 2% in June 2020 but has gradually increased over the previous 12 months. Pent-up demand, the search for bigger homes as a result of the pandemic, and the decision by the chancellor, Rishi Sunak, to waive stamp duty on properties worth less than £500,000 have all contributed to the rise.
The ONS said the sharp jump in house price inflation from 9.8% in May was linked to the start of July deadline for the threshold for paying stamp duty to drop to £250,000, ahead of a return to its pre-crisis level of £125,000 from October.
Noting that it was the biggest annual rise in house prices since November 2004, Mike Hardie, the deputy director, prices division at the ONS, said the figure was boosted by “a rush to complete purchases before changes to the stamp duty holiday came into effect at the end of June”.
Wales showed the biggest jump in house prices of the four countries of the UK, registering property inflation of 16.7% in the past year. The price of a home rose by 13.3% in England, 12% in Scotland and 9% in Northern Ireland.
The English region with the hottest property market in the past year has been the north-west, where prices were up by 18.6%. London, the part of the UK hardest hit by the repeated coronavirus lockdowns of the economy, recorded the smallest annual increase, 6.3%.
Lucy Pendleton, a property expert at the independent estate agents James Pendleton, said: “Prices went berserk as the stamp duty taper closed in. The pace of growth set in the north-west is frankly astonishing.”
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
According to ONS figures, the increase in house prices over the past year is almost equivalent to the average weekly earnings of a full-time employee in the UK.
Samuel Tombs, a UK analyst at Pantheon Macroeconomics, said he did not expect the current rates of property inflation to last.
“We anticipate that house price growth will slow over the coming months, as the impact from the temporary increase in the stamp duty threshold fades, particularly once it returns to £125,000 at the end of September. Timely indicators also suggest house price growth will decelerate. For instance, Rightmove reported that asking prices rose at a far more restrained 5.6% year-over-year rate in August.”