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| The Halifax House Price Index, showed that house prices reached an all-time high in July. Photo: Getty |
By Lucy Harley-McKeown, Yahoo Finance UK
This week, housing has hit the headlines due to a coronavirus-related bump in prices, and suggestions on how to plug government budget holes. Construction firms have also been thinking about their future as a “chilly autumn” looms.
Here’s what you need to know:
Halifax House Price Index
The Halifax House Price Index, released on Friday, showed that house prices reached an all-time high in July, thanks to a post-lockdown “mini-boom” in the property sector.
The average price hit £241,604 ($315,135) last month, according to the index and was 1.6% higher than in June and 3.8% higher than in July 2019.
“Following four months of decline, average house prices in July experienced their greatest month on month increase this year, up 1.6% from June and comfortably offsetting losses in 2020,” said Russell Galley, managing director at Halifax.
“The average house price in July is the highest it has ever been since the Halifax House Price Index began, 3.8% higher than a year ago.”
On a quarterly basis, prices were down just 0.2%. Despite this, the house price-to-earnings ratio of 6.18 remains among the highest recorded since before the 2008 financial crisis.
House prices have climbed due to a release of pent-up demand caused by coronavirus lockdowns.
Buyers are also taking advantage of the stamp duty holiday, meaning many have sped up their search.
Rightmove shares surged
Good news for property owners from the Halifax Index meant investor confidence grew in the market.
Shares in property portal Rightmove (RMV.L) surged on Friday as investors looked past a fall in half-year revenue and instead focused on signs the housing market was coming back to life.
The half-year report showed revenue declined by 34% to £94.8m in the first six months of the year. Operating profit dropped 43% to £61.7m ($81m).
However, the stock jumped over 7% as chief executive Peter Brooks-Johnson flagged “record levels” of activity in the housing market since it reopened in mid-May.
Construction jobs axed, despite rebound
Also on the slate in the past week, were UK construction output figures.
Firms have seen the fastest rebound in activity in five years over the past month, new figures suggest.
A bellwether survey of construction firm leaders showed a “sharp and accelerated expansion” of work in July, particularly in housebuilding, but it was not enough to stop a continued fall in employment.
One in three firms surveyed reported a decline in employment in the past month, with around the same proportion expecting output to fall over the next 12 months.
Some said clients remained "apprehensive" about committing to new projects, sparking concerns about whether they would have enough new work to replace completed jobs.
How to plug a budget hole
Other reports over the past few weeks have shown proposals for how the Treasury should tackle unsustainable debt from the coronavirus crisis.
Leading think tank, the Social Market Foundation (SMF) suggested the Treasury could raise £421bn over the next 25 years by introducing a tax on rising property prices.
The organisation warned on Thursday that, without “radical action” to raise significant taxation revenues, the UK could be facing years of stagnant growth that would “blight the lives of future generations.”
A so-called “property capital gains tax” on all homes sold in the UK would see homeowners pay a 10% levy on the increase in the value of residential properties they own since they were last sold.
This could raise hundreds of billions over the next few decades, the think tank said, noting that it would allow the Treasury to tap into “unearned” gains on homes in the face of “unsustainable” national debt.
Capital gains on second homes and buy-to-let properties are already taxed, at 18% for basic rate taxpayers and 28% for higher rate taxpayers.
