UK house price inflation slowed more-than-expected in July from a 17-year high as the tapering of stamp duty relief in England took the heat out of the market, data published by the Nationwide Building Society showed on Wednesday.
House prices grew 10.5 percent year-on-year in July, slower than the 13.4 percent increase posted in June. This was also weaker than the economists' forecast of 12.1 percent.
On a monthly basis, house prices fell unexpectedly by 0.5 percent, reversing a 0.7 percent rise in June. Economists had forecast prices to climb 0.6 percent. This was the first fall in four months.
Nonetheless, house prices increased by an average of 1.6 percent a month over the April to June period, which was more than six times the average monthly gain recorded in the five years before the pandemic.
"The modest fallback in July was unsurprising given the significant gains recorded in recent months," Robert Gardner, Nationwide's chief economist, said.
The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market, Gardner added.
Gardner said activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the incentive for people to bring forward their purchases to avoid the additional tax.
Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises, as most analysts expect, as government support schemes wind down, Gardner noted. But even this is far from assured.
As the tax break was just one of many factors that have boosted housing market activity and prices this year, house price inflation is expected to cool rather than collapse, Andrew Wishart, an economist at Capital Economics, said.