Property market ‘running out of steam’: House prices slip for the first time in six months as stamp duty deadline disappears over the horizon
- Average house price dropped 0.3 on December to £251,968 according to Halifax
- However, the typical home is still worth £13,000 more than it was a year ago
- There are signs that the boom which began in summer 2020 is coming to an end
The average UK house price fell in January compared to December in an early sign that the market could be beginning to cool, the Halifax revealed today.
According to its monthly house price index, values dropped by 0.3 per cent to £251,968. However, the property market was still up 1.6 per cent on the quarter and 5.4 per cent annually.
So although the typical home is still worth £13,000 more than it was a year ago, it was the biggest monthly decrease since April 2020, when the housing market closed for eight weeks due to the first national lockdown.
Average UK house prices dropped for the first time in six months in January to £251,968
Until January, house price growth had been climbing steadily each month since July. This was a result of pent-up demand among home buyers after the first national lockdown, combined with the positive effect that chancellor Rishi Sunak’s stamp duty holiday had on the market.
The stamp duty holiday, which saves buyers up to £15,000 by eliminating the tax on the portion of the purchase under £500,000, is scheduled to end on 31 March.
With the average home transaction taking around three months to complete many buyers now feel that they have missed the boat, with some holding on in the hope that the Chancellor will extend the holiday.
Continued growth at the end of 2020 meant that prices still increased quarter-on-quarter in January, however.
In the three months between November and January, they were 1.6 per cent higher than they were in the three months between August and October.
While the average house price grew year on year, it has dropped since November
As of December, transaction numbers in the UK housing market were still on the rise
According to the Halifax index, house prices also remained significantly higher than they were this time last year in January, sitting 5.4 per cent above January 2020 levels.
While some indicators still show growth, particularly in December, there are signs that demand in the market is beginning to fall away following 2020s ‘mini boom’.
HMRC data has shown that transaction levels continued to rise in December, for the eighth consecutive month, increasing by 13.1 per cent compared to November.
Running out of steam? January’s house price fall was the first since July 2020
However, Bank of England figures have revealed that mortgage approvals fell in December for the first time in seven months, declining by 1.8 per cent month-on-month to 103,381.
Russell Galley, managing director, Halifax, said: ‘There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August.
‘The stamp duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.
‘How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.
‘That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.’
