House prices in Wales increased again during the summer following a slight dip in the second quarter of the year, according to the latest index.
A surge of house purchases in August resulted in a 3.5% year on year rise in prices to an average of £176,316, beating the previous record set in March 2017, the figures from the Principality Building Society index show.
House prices in Wales have now increased in each month of this last quarter as first time buyers and home movers continued to take advantage of the low rates of interest currently available on home loans.
The report points out that there was a good start to 2017 with transactions during the first six months being the highest of the last five years, apart from March 2016 when there was a surge of property purchases ahead of the introduction of the 3% surcharge in stamp duty on second homes and buy to let properties.
However, housing sales slowed in July 2017, against the normal trend and the report suggests that was probably caused by a sense of uncertainty prevailing at the time of the general election in June.
But sales rebounded in August to the highest level since August 2007, although they appear subsequently to have fallen back to a lower rate in September 2017. Historically low interest rates and high employment levels remain in place, which are both key drivers in the demand for houses, the report explains.
It also points out that earlier this month the Welsh Government announced details of the new Welsh Land Transaction Tax. There will be no tax paid on main properties up to £150,000 in a bid to encourage first time buyers to get on to the property ladder.
However, the tax will increase up to £17,500 for sales of homes that cost between £400,000 and £925,000, and the report warns that this could result in a slowdown of sales at that end of the market.
‘We saw a clear bounce back in the housing market across Wales as people continue to take advantage of favourable low interest rates and high employment,’ said Tom Denman, chief finance officer of the Principality Building Society.
‘There are record levels of first time buyers across the UK and it is clear that while areas such as London are seeing a drop in house prices, the Welsh market has been stable. However, sluggish wage growth and the Bank of England’s broad hints that it will increase interest rates in November, means there is still a prevailing sense of caution that the market will continue the modest growth we have seen during the past couple of years,’ he added.