For the first time since the stamp duty holiday was announced, house prices have taken a slight hit.
Chancellor Rishi Sunak has indicated it is unlikely the tax break will be extended after March 31st.
UK house prices fell month-on-month in January for the first time since the introduction of the stamp duty tax break, according to a major UK Building Society. Is the mini property market boom now over as the end of the tax break approaches?
The UK Nationwide house price index fell 0.3 per cent in January compared with December 2020, the first fall since June and down from a 0.9 per cent increase in the previous month. This is a much lower figure compared to the 0.3 per cent expansion in prices that was forecast by economists.
House prices are 6.4 % higher
Compared with the same month last year, house prices are 6.4 % higher, a small decrease from the 7.3 % annual growth that was recorded in December.
The slowdown 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.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The runaway housing market is starting to show the first indications of taking a foot off the gas. The annual rate of growth slowed ‘modestly’ in January, according to Nationwide, while prices fell 0.3% month-on-month. It comes after a stonking performance in 2020 when the remarkable resilience of the market in the face of the pandemic was evident, despite the first national lockdown.”
It’s expected that over the course of this year, or at least until the current pandemic restrictions are eased dramatically, prices for homes across the UK may continue to cool off. Restrictions are still tough, and the desire to move into a new home with more space, a bigger garden, or maybe in a more rural location is still going to continue to keep demand high.
What are my thoughts on this?
The future of prices in the short term however will mainly depend on the Chancellor’s decision on the tax break. If it ends abruptly on March 31st, then not only will demand decrease, but with over 500,000 transaction currently going through from sale agreed to completion, we may face a situation whereby some buyers pull out of deals that they anticipated would complete in time. This again will add pressure to house prices, and a continued decrease is possible.
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