U.K. home prices grew by more than 13% year-over-year in June, the highest level of growth since November 2004, a key index showed on Tuesday, giving a boost to shares in companies that build houses.
Shares in Taylor Wimpey /zigman2/quotes/208623755/delayed UK:TW +1.63% , Persimmon /zigman2/quotes/206444744/delayed UK:PSN +2.56% , Barratt Developments /zigman2/quotes/209812640/delayed UK:BDEV +1.57% , and Berkeley /zigman2/quotes/202576163/delayed UK:BKG +0.71% , which are constituents of the large-cap FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.05% index, all rose, along with mid-cap FTSE 250 /zigman2/quotes/210598417/delayed UK:MCX +0.60% housebuilders Bellway /zigman2/quotes/208360300/delayed UK:BWY +2.00% , Redrow /zigman2/quotes/206663416/delayed UK:RDW +1.41% , Galliford Try /zigman2/quotes/209256748/delayed UK:GFRD -0.48% , and Crest Nicholson /zigman2/quotes/207992108/delayed UK:CRST -0.08% .
The U.K. Nationwide house price index reported 13.4% annual growth in U.K. home prices in June, with prices up 0.7% from May in the third consecutive monthly rise.
“While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum,” said Robert Gardner, the chief economist at Nationwide, a co-operative lender.
“Activity will almost inevitably soften for a period after the stamp duty holiday expires at the end of September, given the strong incentive for people to bring forward their purchases to avoid the additional tax,” Gardner added. “Nevertheless, underlying demand is likely to soften around the turn of the year if unemployment rises as most analysts expect, as government support schemes wind down.”
Amid the pandemic, the British government introduced a pause on stamp duty, which is a type of property tax on purchases over a certain threshold in the U.K.
Analysts noted that the strength in housebuilders on Tuesday came as investors bet that the frenzy in the British property market would benefit company earnings.
The property figures and housebuilders’ boost met an otherwise positive day of London trading. The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.05% , the index of the U.K.’s top stocks by market capitalization, rose 0.2%.
European stocks took a turn into the red on Monday as fears mounted over the more contagious Delta variant of COVID-19. Spain, Portugal, and Hong Kong joined the list of places putting new restrictions on travelers from the U.K., where the variant is prevalent.
“After yesterday’s disappointing turn, U.K. stocks have perked up on Tuesday,” said Russ Mould, an analyst at AJ Bell.
“Investors bid up shares in tobacco sellers, banks and telecoms, while there was mixed appetite for miners,” Mould added.
Shares in both London-listed tobacco giants British American Tobacco /zigman2/quotes/209116881/delayed UK:BATS +0.21% and Imperial Brands /zigman2/quotes/208789104/delayed UK:IMB +0.15% lifted, as did bank stocks Barclays /zigman2/quotes/208409333/delayed UK:BARC +0.40% , Lloyds /zigman2/quotes/202285510/delayed UK:LLOY +0.17% , and HSBC /zigman2/quotes/203901799/delayed UK:HSBA -0.56% .
IWG /zigman2/quotes/207263311/delayed UK:IWG +4.20% saw its stock jump more than 8% before settling near 3% higher. The office company formerly known as Regus, a rival to WeWork, has been in talks with U.S. private equity group CC Capital about a potential takeover valuing it at more than £4 billion ($5.5 billion), Sky News reported late Monday .
Shares in Argo Blockchain /zigman2/quotes/209037613/delayed UK:ARB -7.58% , one of the few publicly-listed crypto asset miners, fell near 1% as the British group said it had taken out a £14 million short-term loan to meet operating cash flow requirements and build out a data centre in Texas. The loan, agreed with digital asset investor Galaxy Digital, uses a portion of Argo’s bitcoin holding as collateral. The price of bitcoin /zigman2/quotes/31322028/realtime BTCUSD +0.59% has fallen more than 40% since highs above $60,000 earlier this year.