Market to slow sharply if stamp duty holiday ends March 31 - warning

The Nationwide has pulled no punches with Chancellor Rishi Sunak - it’s made it clear that if the stamp duty holiday cliff edge happens on March 31, the housing market may well slow sharply.

Nationwide’s chief economist Robert Gardner says: “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.”

The warning comes as the lender’s own house price index shows growth easing for the first time in six months - growth fell from 7.3 per cent at the end of December to 6.4 per cent at the end of January. 

Nationwide says that on a monthly basis prices fell 0.3 per cent in January and Gardner comments: “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. 

“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 - note that our house price index is based on data at the mortgage approval stage.”

Gardner says the long-standing relationship between the housing market and broader economic trends has broken down over the past nine months because many peoples’ housing needs have changed as a direct result of the pandemic. This is because many are opting to move to less densely populated locations or different property types, despite the sharp economic slowdown and the uncertain outlook.

“Indeed, the total number of mortgages approved for house purchases in 2020 actually exceeded the number approved in 2019, and house price growth ended 2020 at a six-year high, even though the economy was probably around 10 per cent smaller than at the start of 2020, with the unemployment rate around a percentage point higher” Gardner continues.