'Stamp Duty scars' boost October house prices

The end of last year’s Stamp Duty holiday has given a temporary boost to house price data for October 2022.

The latest Land Registry House Price Index shows values rose 12.6% annually during October 2022 compared with 9.9% a month before and 12.9% in August.

The Land Registry said: “The increase in annual house price percentage change was mainly because average UK house prices decreased by £6,000 between September and October 2021, following changes to Stamp Duty Land Tax.”

Monthly price growth was 0.3% between September and October 2022, putting the average value of a UK property at £296,422.

Lawrence Bowles, director of research at Savills, said the data “bears the scars of last year’s Stamp Duty holiday deadline” when prices fell by 2.1% between September and October in 2021 as buyer demand eased.

He added: “Higher mortgage rates mean price growth and activity are likely to slow in the coming months when mortgage rates peak.

“But, on the assumption that interest rates gradually ease back from the middle of 2024, Savills is forecasting that values will begin to recover and that the average UK house price will rise by a net figure of 6% in nominal terms over the next five years.

“Further Stamp Duty cuts announced in this September’s ‘mini-Budget’ are also likely to have a distortive effect on the market – but to a much lesser extent. This time, the savings are less generous and the deadline to complete further into the future, so there is less pressure to transact now rather than later.”

Overall, he said, Savills is predicting fewer mortgaged transactions for the rest of this year and in 2023 given these higher interest rates.

He highlighted that inflation data yesterday showed the cost of living measure eased from 11.1% to 10.1%, adding: “That should give the Bank of England the freedom to slow and eventually reverse its trajectory of interest rate rises, which will ease pressure on mortgage affordability and allow transaction activity to return to more normal levels in 2024 and beyond.”

Karen Noye mortgage expert at Quilter, added: “House price growth is starting to slow down, with new buyer enquiries declining for the sixth consecutive month.

“Additionally, mortgage approvals for house purchases have decreased, indicating that prospective homebuyers may be becoming more cautious.

“Just a few days ago, we saw the Bank of England warn that mortgages are going to get considerably more expensive next year for millions. This will take some of the froth out the market as many people will choose to batten down the hatches and others will be forced into putting their homes on the market in a bid to downsize, unlock cash and achieve lower monthly bills.

“The housing market in the short to medium term is likely to suffer somewhat however with so little stock around it won’t take long for prices to start to rise again after a projected dip in the new year.”

Simon Gerrard, managing director of Martyn Gerrard estate agents and past-president of NAEA Propertymark, said the market is pretty flat as it continues to adjust to repeated interest rate hikes and choppy economic waters.

He added: “There’s a more important issue at play, namely that across the country we have a chronic undersupply of housing.

“Successive governments have failed to build enough houses to keep pace with population growth, and the latest proposals in the Levelling Up Bill to allow neighbours to prevent planning applications will only make matters much worse. I won’t be alone in wondering ‘where will our children live?’

“Questionable data aside, anyone in the sector will tell you we lack enough homes. The Prime Minister needs to grasp the nettle and enact genuine planning reform, even if this provokes his backbench. Next month marks the start of a new year, so let’s hope it marks the start of a new approach to planning, too.”