Demand surge offers hope for market after stamp duty break ends

A surge in demand from buyers, even those unlikely to benefit from the stamp duty holiday, offers hope for the market for the rest of the year. 

The Nationwide says that during February, annual house price growth was 6.9 per cent- up from 6.4 per cent in January.

The average price of a home now stands at £231,061 - the highest ever.

Robert Gardner, Nationwide's chief economist, explains: “House prices rose by 0.7 per cent month-on-month, after taking account of seasonal effects, more than reversing the 0.2 per cent monthly decline recorded in January.

“This increase is a surprise. It seemed more likely that annual price growth would soften further 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 and price growth would be expected to weaken well before that, given that the purchase process typically takes several months. 

“It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present. Shifts in housing preferences may also be providing a more significant boost to demand, despite the uncertain economic outlook.

“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.

“As a result, the outlook for the housing market is unusually uncertain. There is scope for shifting housing preferences to continue to boost activity, especially if there is further policy support in the Budget. Nevertheless, if labour market conditions weaken as most analysts expect, it is likely that the housing market will slow in the months ahead.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “The rebound in prices doesn't surprise me. We have seen the pre-Christmas home-buying frenzy replaced by measured decision making in a market where supply and demand is becoming more balanced. 

“A combination of better weather, positive Budget prospects, vaccination rollout and easing of lockdown restrictions, is adding to optimism, irresepctive of the ending of the stamp duty holiday in March.

“As a result, I expect to see a dip in transaction numbers in the short term but in the medium term more activity, particularly as sellers are increasingly tempted to put their properties on the market, reflected in recent higher market appraisal numbers.”

And Nick Barnes, head of research at Chestertons, adds: “How the market will perform over the next few months will be largely impacted by the Chancellor’s Budget announcement and the government’s ability to stick to the planned roadmap. Initiatives such as a mortgage guarantee for five per cent deposit holders could open up the market further and see a wave of first-time buyers taking advantage.”