UK house prices fall as end of stamp duty holiday nears
House prices in the UK fell in January for the first time since June, as demand eased before the end of the stamp duty holiday on 31 March, according to Britain’s biggest building society.
The average price of a house fell by 0.3% to £229,748 between December and January, said Nationwide. The annual growth rate also eased for the first time since June, to 6.4% from 7.3%.
The housing market has been boosted in recent months by the stamp duty holiday, which means there is no tax to pay on property purchases up to £500,000 in England and Northern Ireland. The chancellor, Rishi Sunak, announced it in July to kickstart the market after it ground to a halt during the first coronavirus lockdown when viewings and all but essential house moves were banned, and estate agents were forced to close.
Nationwide warned the housing market could slow “sharply” in the coming months, if Sunak does not extend the stamp duty holiday and unemployment continues to rise.
Robert Gardner, the Nationwide chief economist, said: “To a large extent, the slowdown [in January] probably reflects a tapering of demand ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase.
“While the stamp duty holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months.”
Sunak has come under pressure to extend the tax break to avoid a collapse in house sales, with MPs calling for an extension during a virtual parliamentary debate on Monday.
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Tom Bill, the head of UK residential research at the estate agent Knight Frank, called for the holiday to be phased out gradually. “The sensible option would be to taper the holiday and avoid any cliff-edge moments for the housing market or wider economy, particularly given how important the mobility of labour will be in coming months,” he said. “We expect prices to end the year flat as demand becomes steadier and more seasonal in the second half of this year.”
Despite the economic downturn caused by the Covid-19 pandemic, the market has been buoyant, partly as people’s housing needs have changed. Many have moved out of big cities to less densely populated areas and sought out bigger homes with gardens, amid a shift to working from home and a decline in commuting.
Gardner noted that the total number of mortgages approved for house purchases in 2020 exceeded the number approved in 2019, and house price growth ended 2020 at a six-year high, even though the economy was probably about 10% smaller than at the start of 2020, and the unemployment rate, at 5%, around a percentage point higher.
