PwC comments on the latest house price and inflation data

Jamie Durham, economist at PwC, comments on today's house price data:

“The house price ‘mini boom’ continued in January 2021, with prices 7.5% higher than a year before. The rate of growth did decline slightly from December when prices rose by 8.0%, bringing to an end a period of accelerating price growth since July 2020.

“There was strong growth across all regions of the UK, and particularly in the North of England. Prices in the North West increased by 12%, which is the highest rate of growth in the region since June 2005. Price growth in the capital accelerated to 5.3%, with the average property price remaining above half a million pounds.

“Looking ahead, the extension of the stamp duty holiday is likely to continue to support housing demand and price growth throughout the first half of this year. Pent up demand, a shift in housing preferences towards properties with more space and the accumulation of savings since the initial lockdown have all helped to support housing demand over the last few months and are likely to continue.

“However, as the year progresses, price growth is likely to slow from the recent highs. As restrictions are eased and life starts to return to normal, it’s possible priorities will change and people will have less time to consider house moves, which may weigh on price growth.  Average annual price growth is also likely to slow towards the end of the year and into 2022 as prices correct following the end of the stamp duty holiday.”

Hannah Audino, economist at PwC, comments on today's inflation data:

"Consumer price inflation slowed to 0.4% in February, down from 0.7% in January, reflecting the effects of weak demand and spare capacity in the economy during the current national lockdown. 

"As with other lockdowns over the past year, prices for clothing and footwear were discounted again in February and exerted the biggest downward pull on inflation. Retailers will be attempting to offload unsold stock against a backdrop of weak demand. 

"Inflation is likely to pick up this year, as consumers unleash some of their £150 billion of excess savings on the economy, combined with potential supply-side distortions due to the pandemic and Brexit. Businesses will also be looking to recoup lost revenues from the past year, although the extension to the VAT cut for the hospitality and leisure sector will continue to exert some downward pressure on prices. If inflation does creep up beyond the 2% target towards the end of the year and beyond, we expect the Bank of England to prioritise supporting the recovery over reducing inflation." 

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