House prices in January fell by 0.3% to £229,748 compared to December, according to the latest Halifax HPI.
This is the biggest drop since April 2020, said Halifax House Price Index. The average UK house price was £251,968 in January. The annual growth rate also eased for the first time since June, to 6.4% from 7.3%. However, the data found that quarterly house prices from November to January rose 1.6 per cent in the previous quarter.
Halifax managing director Russell Galley says:
“The average UK house price slipped by -0.3 per cent in January, the biggest monthly fall since April last year.”
“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.”
Basically, the lockdown has reduced the supply which was keeping the prices high. The buyers had to run for what was available.
The Budget is around the corner now and we have to see whether the Chancellor will extend the stamp duty tax break. He has a big deficit and many other levers to pull that could affect the market in much more significant ways.
The housing market boosted in recent months due to the stamp duty holiday. Stamp duty holiday means no tax on property purchases up to £500,000 in England and Northern Ireland. The chancellor, Rishi, announced stamp duty holiday in July to kickstart the market during the first coronavirus lockdown. The government had banned all viewings except for essential house move in the first lockdown. Moreover, estate agents also had to close in that phase.
Nationwide had already warned the housing market could slow “sharply” in the coming months.
if Sunak does not extend the stamp duty holiday and unemployment continues to rise.
Robert Gardner, the Nationwide chief economist, said:
“To a large extent, the slowdown [in January] 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, the activity would be expected to weaken well before that, given that the purchase process typically takes several months.”