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House prices ‘dipped before stamp duty holiday extension’

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Written by: Owain Thomas
31/03/2021
House prices dipped by 0.2% in March after seasonal adjustments following a rise of 0.7% in February, according to Nationwide Building Society’s house price index.

However, the lender’s data shows the typical property was still worth 5.7% more than the same point last year at £232,134.

The mutual said the yo-yo monthly performance was likely a result of the original stamp duty holiday deadline at the end of March, and the subsequent extension should maintain a short-term buoyant housing market.

“Given the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the chancellor announced the extension in the Budget,” said Nationwide chief economist Robert Gardner.

“Recent signs of economic resilience and the stimulus measures announced in the Budget, including the extension of the furlough scheme and the stamp duty holiday, as well as the introduction of a mortgage guarantee scheme, suggest housing market activity is likely to remain buoyant over the next six months.”

However, he warned that the longer-term outlook remained highly uncertain and depended on the recovery from the pandemic and changes and withdrawal of government support schemes.

Regional ups

The data also revealed how the UK housing market had fared over the first quarter of 2021, showing an average price of £231,644 – up 6.3% from Q4 2020.

Regionally, the North West maintained top spot as average prices in the region grew by 8.2% in the first three months.

The West Midlands and Northern Ireland were the next strongest growers at 7.6% and 7.4% each.

London and its outer metropolitan areas were the only regions to see growth below 6% at 4.8% and 5.6% respectively.

England was the weakest performing home nation in the three months to March 2021, with annual house price growth of 6.4% – a slight slowing compared with last quarter, when prices rose at an annual rate of 6.9%.

Wales and Scotland saw rises of 7.2% and 6.9% respectively.

‘Dose of reality’

North London estate agent Jeremy Leaf noted these figures reflected a market pause as many people decided meeting the original stamp duty deadline at the end of March would be almost impossible, mainly due to the backlog.

“However, the announcement of the holiday extension and rapid rollout of the vaccine have acted like a shot in the arm and re-energised many, especially those new to the market,” he said.

“This is underpinned by a shortage of available properties even though stock levels have increased lately as owner confidence to invite visitors to their homes has improved.

“Looking forward, we don’t expect too much change on the ground other than another rapid dash to take advantage of lower stamp duty for the higher-priced properties, particularly in places like London, before the end of June.”

However, Glenhawk CEO Guy Harrington was more concerned about a sudden price drop at year end.

“Finally a dose of reality. It is becoming evident that pent up demand and government stimulus had fuelled house price growth to unsustainable levels,” he said.

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