UK house prices rise by most since 1988

British house prices saw their most widespread rises since 1988 last month, but fewer homes were put up for sale and buyer demand grew less fast ahead of the end of a tax break on property purchases, an industry survey showed on Thursday.

The Royal Institution of Chartered Surveyors said its main house price balance – a measure of the proportion of its members reporting price rises over the past three months – rose to +83 in June from a downwardly revised +82 in May.

This was the index’s highest reading since 1988 and bucked forecasts for a fall to +77 in a Reuters poll of economists.

However, the balance for new listings dropped to -34 from May’s -24, and growth in buyer inquiries slowed to +14.

“This is happening across all regions of the UK, coinciding with the stamp duty holiday beginning to taper off,” RICS said.

Finance minister Rishi Sunak cut stamp duty, a tax on house purchases, in July 2020. But from this month it starts to return to its pre-pandemic level.

The tax cut aimed to reverse a slump in property sales at the start of the pandemic, and helped fuel a surge in property prices and some new construction. Many households were already seeking more spacious housing suited to working from home.

Estate agents told RICS there was a surge of activity to complete sales last month before the tax break began to be phased out ahead of its complete expiry at the end of September.

Mortgage lender Halifax reported on Wednesday that its measure of house prices fell by a monthly 0.5 per cent in June, the first decrease since January.

RICS said its members expected sales volumes to fall slightly over the coming months. But most thought house prices would be higher in a year’s time as demand for property continued to outstrip supply, worsening affordability.

“While the role of the credit channel and the extended period of ultra-low interest rates can’t be ignored, it is critical the government is able to create the conditions to support higher levels of new-build development,” RICS chief economist Simon Rubinsohn said.