House price growth is running out of steam ahead of the stamp duty holiday cliff-edge.
That’s the suggestion from the Halifax; its latest index shows average house prices across the UK fell 0.3 per cent in January compared to December, with the typical home now costing £251,968.
This is the steepest monthly fall since the spring 2020 lockdown although the annual rate of increase remains relatively high - 5.4 per cent.
“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” explains Halifax managing director Russell Galley.
He adds that while agreed sales are still well above pre-pandemic levels, new instructions across the market “decreased noticeably”.
“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.”
He coninues: “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.”
Agents appear to agree that the market is now showing concern about the looming stamp duty holiday deadline.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “These figures clearly demonstrate the importance of extending the stamp duty holiday end date, not only to avoid the ‘cliff edge’ impact on the property market but on the chances of recovery.
“In particular, the Chancellor may give consideration to extending those already under contract as the end of March approaches, as well as those perhaps who are participating in the crucial help to buy scheme, as the rollout of the vaccine continues to accelerate.
“Either way, we expect a dip in transactions and a softening of prices but sense among our buyers and sellers a determination to move even if that means missing out on the deadline and having to negotiate on price to share the saving.”
And Tom Bill, head of UK residential research at Knight Frank, adds: “The initial wave of pent-up demand that began in May 2020 is now clearing through the system, accelerated by the end of the stamp duty holiday.
“The sensible option would be to taper the holiday and avoid any cliff-edge moments for the housing market or wider economy, particularly given how important the mobility of labour will be in coming months. We expect prices to end the year flat as demand becomes steadier and more seasonal in the second half of this year.”