U.K.’s White-Hot Housing Market Shows More Signs of Normalizing

Home prices continued to swell in July across the U.K.’s hot property market, but a slowing pace points to cooling activity, according to a report Friday from Halifax.

Yearly gains of 7.6% last month pushed the average property price in the nation up to £261,221 (US$362,246). Though gains of close to 8% annually are far from negligible, it was a fall from June, when the rise stood at 8.7%, and the lowest level the metric has recorded since March, the bank and mortgage provider said.

In cash terms, that typical price is now a little below May’s peak, but still more than £18,500 higher than a year ago.

The slowdown in price gains can be attributed to a number of things, according to Tom Bill, head of U.K. residential research at Knight Frank.

“The U.K. housing market is putting the distortions of the last 18 months behind it,” he said in a statement. “The stamp duty holiday is winding down at the same time as people are focusing on their summer break, which has taken some of the heat out of the market.”

The stamp duty holiday—which was introduced last summer to encourage spending by scrapping the transfer tax on the first £500,000 of a home sale—lowered the savings to the first £250,000 at the end of June and will revert to the standard £125,000 at the end of September when the measure concludes.

Meanwhile, the supply shortage that has been the catalyst for the frenzied home price growth in the nation looks set to reach its peak this summer, Mr. Bill said.

“The gravitational pull of strong demand and the creeping sense that the worst of the pandemic may be behind us means more prospective sellers returning from their summer break will decide to sell,” he added. “We expect U.K. price growth to end the year at 5%, which means sellers that act sooner rather than later may benefit from more buoyant prices.”