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Demand for new UK homes cools but price hike shows 'few signs of wavering'

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·2-min read
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Demand from tenants looking to rent new homes remained strong. Photo: PA
Demand from tenants looking to rent new homes remained strong. Photo: PA

Demand for new homes in the UK is cooling as the effects of a Stamp Duty holiday begin to taper off.

The latest residential market survey by the Royal Institute of Chartered Surveyors (RICS) showed the number of new buyer enquiries slowed in July.

A net balance of -9% of respondents said they saw a fall in enquiries, down from +10% in June. It ends a four-month streak of growth in demand for new homes. The number of agreed sales also dipped.

Chart:RICS
Chart:RICS

The cooling of demand comes after the UK's Stamp Duty holiday ended at the start of the month. Between June 2020 and 1 July 2021, buyers didn't have to pay any Stamp Duty on the first £500,000 ($691,617) of their purchase price. Stamp Duty has now reverted to kicking in above £250,000.

The tax relief provided a strong incentive to complete house purchases before the end of June, especially for higher priced properties.

"The overall tone to the market remains firm with the metrics capturing price expectations showing few signs of wavering,” said Simon Rubinsohn, chief economist at RICS.

House price growth was influenced by the lack of properties ready for sale, with a net balance of -46% of respondents reporting a fall in new listings, down from the -35% reported in June.

78% of respondents reported house prices rising, slightly down from the 82% reported in the past two months.

Read more: House price growth cools as end of stamp duty relief takes 'heat out of market'

A net balance of +66% of respondents predict that prices will continue to rise over the next twelve months, up on the +56% from last month.

“A strong message from survey respondents is that buyers are continuing to place a premium on space with the prospect of a hybrid model of work being adopted by many organisations, providing the opportunity for greater flexibility around location," said Rubinsohn.

“This is being reflected both in the challenge some current homeowners are having in moving up the property ladder as well in stronger price expectations from the RICS survey for larger than smaller properties.”

Demand from tenants looking to rent new homes remained strong for the fifth quarter in a row, with a net balance of +52% reporting a rise.

A net balance of +50% of respondents said rents were likely to rise over the next three months, as new instructions from landlords slipped from -6% last month to -20% in July.

Watch: Am I wasting my money by renting?

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