The housing market is cooling as demand for properties slackens ahead of the stamp duty holiday deadline, it has been claimed, and could dip sharply after the relief ends on March 31st.
Mortgage giant Nationwide says house price growth slowed during January from 6.4% to 7.3% the month before, its chief economist Robert Gardner (pictured) claiming that this was due largely to a tapering of demand caused by the HM Treasury policy.
He says this prompted many people considering a house move to bring forward their purchase.
“While the stamp duty holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months,” he says.
“The typical relationship between the housing market and broader economic trends has broken down over the past nine months.
“This is because many peoples’ housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.”
Gardner points to the extraordinary figures from the market – the number of mortgage approved last year during the worst of the pandemic was greater than 2019’s total despite the economy shrinking by 10% and unemployment rising significantly.
“Looking ahead, shifts in housing preferences are likely to continue to provide some support for the market.
“But if the stamp duty holiday ends as scheduled, and labour market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months.”
Anthony Codling, Twindig: “House price fell for the first time in six months in January 2021, possibly reflecting a tapering of demand as the scheduled end of the Stamp Duty holiday approaches.
“Perhaps if Stamp Duty reform is required a sales tax rather than a purchase tax should be considered.”
Nicky Stevenson, Fine & Country: “A predicted collapse in house price growth has failed to materialise. This was supposed to be the month that legions of buyers effectively threw in the towel and moderated their offers having been forced to remove the stamp duty tax break from the equation.”
Lee Pendleton, James Pendleton: “Forget the mild monthly price decline, this is hardly the performance of a market in peril. The fact that most buyers agreeing purchases now will almost certainly miss out on stamp duty relief has barely moved the needle so there are wider factors at work here and chances are they’ve been cooking up a storm all along.”
Jonathan Hopper, Garrington: ““Ordinarily, househunting is one New Year’s Resolution most people have no trouble keeping.
“But the reimposition of a national lockdown before the Christmas decorations even came down made it far harder than usual this year.”
Jeremy Leaf: “We expect a softening in prices and transaction numbers rather than a major correction. Most sales arranged are progressing to exchange of contracts without renegotiation, and movement restrictions only build up more pent-up demand, to say nothing of the shortage of listings, which only increase upward pressure on price.”