First-time buying pushes house prices up ahead of stamp duty deadline
First-time buyers continued to drive the housing market in February as they rush to purchase homes before the end of the stamp duty holiday at the end of March.
The annual rate of UK house price growth was 3.9 per cent in February, compared with 4.1 per cent in January.
House prices rose by 0.4 per cent month on month, taking the average UK house to £270,493 from £268,213.
“We have noticed, in our offices, a rush of first-time buyers in particular, trying to take advantage of lower stamp duty rates, which has skewed some parts of the market,” Jeremy Leaf, north London estate agent and a former RICS residential chairman, said.
“Now it is almost too late to benefit from the concession, we are seeing prices settle and more balance between supply and demand,” Leaf added.
The stamp duty holiday for first-time buyers is set to end on March 31. This has driven a significant boost in the housing market as buyers try to avoid tens of thousands of pounds in fees.
“First-time buyer activity continued to recover, with mortgage completions in 2024 just five per cent below 2019 levels,” Robert Gardner, Nationwide’s Chief Economist, said. “This [is] a solid performance, given the interest rate environment.”
In London, the median FTB purchase is set to tip over the threshold for paying stamp duty, meaning the average buyer needs to find an additional £6,250 – something only 15 per cent of FTBs in London can afford, according to a survey from Fairview Homes conducted last December.
CEO of Yopa, Verona Frankish, said: “The UK property market has begun the year on the front foot… [partly] spurred by the impending stamp duty deadline at the end of March, with those making their move keen to reach completion and avoid any increased cost when buying.”
However, Frankish added that while there may be a “momentary market correction” in spring, she expects momentum to continue building beyond into summer.
Easing affordability pressure
The slow reduction of interest rates has helped the housing market.
“Base-rate reductions are having a positive impact on affordability and activity,” Jason Tebb, President of OnTheMarket, said. “Two quarter-point base-rate cuts in the second half of last year, followed by one earlier this month, is certainly helping sentiment and boosting transactions.”
“With the markets expecting more rate reductions this year, this should give those buyers who are reliant on a mortgage for their purchase increased confidence about doing so,” Tebb added.
However, chief executive of mortgage broker SPF Private Clients Mark Harris cautioned that the recent inflation spike has “reduced the likelihood of another imminent reduction in interest rates”.
“Borrowers must plan ahead as much as possible and seek advice from a whole-of-market broker,” he added.