UK House Price Growth Weakens As End Of Stamp Duty Holiday Approaches

UK house price growth slowed for the first time in six months in January ahead of the end of the stamp duty holiday in March, data from the Nationwide Building Society showed on Tuesday.

House prices climbed 6.4 percent on a yearly basis, but weaker than the 7.3 percent increase logged in December. Economists had forecast an annual growth of 6.9 percent.

This was the first time that house price growth weakened in the current sequence of growth that started in July.

On a monthly basis, house prices fell 0.3 percent, in contrast to a 0.9 percent rise seen in December and confounding expectations for an increase of 0.3 percent. This was the first monthly decline since June.

To a large extent, 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, Robert Gardner, Nationwide’s chief economist, said.

“Looking ahead, shifts in housing preferences are likely to continue to provide some support for the market. However, if the stamp duty holiday ends as scheduled, and labor market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months, said Gardner.

The drop in house prices is an early sign of the reversal in the 2020 house price surge, Andrew Wishart, an economist at Capital Economics, said.

The economist expects house prices to dip by 4 percent this year as transaction volumes thin out after the stamp duty holiday and a further rise in unemployment leads to a moderate increase in forced sales, the economist.

Although the economy was around 10 percent smaller than at the start of 2020, and the unemployment rate around a percentage point higher, the total number of mortgages approved for house purchases in 2020 exceeded the 2019 level and house price inflation ended the year at a six-year high, Nationwide said.

According to the latest English Housing Survey published by the government, there was a slight increase in the home ownership rate in 2020, to 64.6 percent from 63.8 percent in 2019. This was the third year in a row that the home ownership rate has increased.

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