After months of Covid-driven price appreciation, U.K. home values showed signs of serious fatigue in July, according to data released Wednesday from the government’s Land Registry.
Between June and July property prices dropped 3.7%, the most significant fall since 1992 and the second steepest decline since 1968, according to the index from the U.K. government’s Office for National Statistics, using data from the Land Registry and other government agencies.
On a yearly basis though, prices increased 8%, leaving the average U.K. home price at £255,535 (US$353,328).
Those annual gains were strongest in the North East of England—the most affordable region in the U.K.—where prices grew 10.8% in the year to July to £144,935. They were weakest in London —the most expensive region in the U.K.—where prices increased by 2.2% over the same time to £494,673.
“The U.K. housing market looks like it will have a predictable finale this year after an explosive start,” Tom Bill, head of U.K. residential research at Knight Frank, said in a statement.
“Demand remains robust and the economic backdrop increasingly has a feel-good factor as Covid disappears into the rear-view mirror,” he said. “The key question is by how much supply picks up as autumn approaches. We expect seasonality and needs-driven buyers to play an important role in driving supply higher, which should start to curb house price growth.”
With the monthly decline being at its highest point in almost 30 years, Knight Frank expects annual growth to end the year in single digits.
The price slump went hand in hand with a plummeting number of transactions.
In July, the estimated number of sales of residential properties with a value of £40,000 or more stood at 73,740—a whopping decline of 62.8% from June, which logged a record level of transactions, the report said.
The chasm between the two summer months can be chalked up to the adjustment of the stamp duty holiday at the end of June.
Introduced last summer, the stamp duty holiday nixed the transfer tax on the first £500,000 of a home sale. At the end of June, the threshold dropped from £500,000 to £250,000, resulting in a flood of buyers rushing to secure the maximum savings.
At the end of September—when the holiday will end—it will return to the usual £125,000.