Property chiefs: Lockdown and end of stamp duty holiday push down house prices

The most recent drop in house prices is primarily caused by the soon-to-end stamp duty holiday, combined with the UK’s third national lockdown, property professionals told City PM this morning.

According to new figures, published by Nationwide earlier this morning, January saw property prices fall for the first time in six months as the end of the stamp duty holiday approaches.

“With prices falling month-on-month, the lockdown and approaching end of the stamp duty holiday have had an impact on the market,” explained Tomer Aboody, director of property lender MT Finance.

“It is still going relatively strong considering the circumstances, but another indication of how buyers perceive stamp duty as being a barrier to home ownership,” Aboody told City PM

Nationwide’s annual house price index showed today that prices fell 0.3 per cent last month, the first time they have fallen since June last year.

According to Mark Harris, chief executive of mortgage broker SPF Private Clients, the drop 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.

“The next few months will be interesting. As we head towards the deadline for taking advantage of the stamp duty holiday, lenders are navigating a fine line between the need for volume and market share versus risk appetite and service,” Harris said.

Mini-boom

The end of 2020 welcomed an increase in house prices as lockdown fuelled the public’s desires to improve living space, explained Anna Clare Harper, chief executive of asset manager SPI Capital in London.

“With the lockdown-inspired desire to improve surroundings and increase indoor and outdoor space, house prices moved into ‘mini boom’ territory in the second half of 2020,” said Harper.

She pointed out that home ownership also increased for the third year in a row, to 64 per cent.

Despite the ‘mini boom’, the slowing of price climbs did not come as a surprise to some as the housing market gets ready to welcome stamp duty again.

“The slowing of the pace of prices rises is no surprise and is what we have been seeing on the high street since Christmas,” said Jeremy Leaf, a North London estate agent and a former RICS residential chairman.

“The market is catching up with itself as the chances of buyers and sellers beating the stamp duty deadline by the end of March recede,” Leaf told City PM

Nationwide said the annual rate of growth hit the brakes since June, slipping back from 7.3 per cent to 6.4 per cent.

“The looming end of the temporary stamp duty reduction is part of the cause of the slowdown in house price growth in January, from a six-year peak,” said Harper.

“In 2020, this ‘discount’ had an exaggerated impact on what buyers could afford since, typically, buyers can get mortgage finance based on the property value, but they cannot borrow money needed for transaction costs,” she concluded.