House prices rose 2.1% in August according to Nationwide, more than offsetting last month’s fall of -0.6%. This brings annual house price growth to 11.0%, supporting our view that price growth will remain strong this year and on track to surpass our forecast of 9.0%.

Only 82,110 transactions were recorded in July, down from the 213,000 recorded in June. This is a monthly fall of 62%, and put transactions 22% below the 2017-19 average for the month. This shows the distorting effect of the stamp duty holiday, with the first and most significant deadline now passed. We expect a smaller spike in September before the next deadline, as buyers can still save up to £2,500, but not to the same magnitude as the June distortion.

Mortgage data suggest activity will remain strong, with 2021 seeing 28% more mortgages approvals so far compared to this time in 2019.

Demand has started to soften, but remains above supply. The latest RICS survey shows demand falling, but it remains above the level of new instructions, which have already been falling for four months. This supply-demand mismatch is echoed by TwentyCI, who reported sales agreed in August to be 9% above the 2017-19 average, while new instructions are 19% below. The gap between supply and demand will continue to be a key driver of price growth.

First Time Buyer numbers were up 63% in June compared to June 2019. Their share of the market has fallen however, down to 25% of all mortgages from 30% in 2019. They are being held back by persistently high interest rates on higher LTV mortgages. Home mover numbers were up 144% and they accounted for 33% of the market, up from 29% in 2019.

There were higher numbers of more affluent buyers during the pandemic. Across both buyer types we’ve seen a greater use of equity, with the average LTV falling to 69%, down from 73% last June. So lenders are more insulated from any house price falls. The average income of both first time buyers and home movers has also increased.

The average UK rent increased 1.2% in the year to July, according to the ONS. Rental growth has been strongest in the East Midlands and the South West, both up 2.5% annually.

Annual house price growth in May was strongest in Merthyr Tydfil at 16.3%, followed by Derbyshire Dales at 15.1%. Only Aberdeen saw values falls over this period, down -0.9%.