Market softens ahead of predicted stamp duty holiday resurgence

The latest house price index from the Halifax suggests the market has softened ahead of the original scheduled end of the stamp duty holiday - with expectations that activity will rev up again now that an extension has been agreed.

Halifax says during the December to February quarter, prices were 0.5 per cent higher than in the preceding three months; year-on-year prices are now 5.2 per cent higher than February 2020. 

Russell Galley, the Halifax’s managing director, comments: “Having enjoyed an extremely strong period of activity in the second half of last year, the housing market continued its softer start to 2021, with average prices down very slightly (0.1 per cent) compared to January. 

“…The government’s decision to extend the stamp duty holiday – one of the main drivers of demand from home movers during the pandemic – has removed a great deal of uncertainty for buyers with transactions yet to complete. The new mortgage guarantee scheme is another welcome development. Whilst mortgage approvals have reached record highs in recent months, hitting levels not seen since before the financial crisis of 2008, raising a deposit continues to be the single biggest hurdle for first-time buyers to overcome.

“In the longer-term, the performance of the housing market remains inextricably linked to the health of the wider economy. The pace and extent of recovery are still highly uncertain, and much will depend on the ongoing success of the UK’s vaccination roll out.

“Though there is the likelihood of an economic ‘bounceback’ from lockdown, with households not unduly impacted by the pandemic deploying the significant reserves of savings that they have built-up, higher unemployment is likely to limit new buyer demand. Therefore, we would not expect the level of growth seen in house prices over the past year to be sustained throughout 2021.”

Analyst Anthony Codling, of PropTech platform Twindig, says: “We expect the double stimulus of the Stamp Duty Holiday extension and the Mortgage Guarantee scheme to increase house prices in the coming months. 

“We have already seen a giant leap in house-hunting activity since the budget and the stamp duty extension has turned the sprint to complete into a marathon to buy. With the mortgage and conveyancing sectors already at full capacity, the prospect of a big completions cliff edge is already a racing certainty.”

One of the big agency analysts - Tom Bill, head of UK residential research at Knight Frank - says it’s likely his expectations for 2021 will now be revised.

"One impact of the extension will be that anyone attempting to forecast what will happen to UK property prices this year will need to re-think their numbers. The extension will be a boost for demand and prices at a time when the UK is moving closer to lifting lockdown measures thanks to a successful vaccine roll-out programme.

“The current Knight Frank forecast is for flat prices in 2021, but the stamp duty holiday, as well as the extension of furlough scheme, means this will be revisited.”

And Jeremy Leaf, north London estate agent and a former RICS residential chairman, says of the Halifax report: “It shows the market pausing in February as many buyers and sellers were deterred by the prospect of not being able to take advantage of the stamp duty holiday, as well as being hampered by further lockdown restrictions.

“However, when it became clear from Budget leaks that there was a good chance of the concession being extended and further support for higher loan-to-value mortgages, the market perked up and gained in confidence, even though the extension is relatively short. We anticipate more much-needed stock coming to the market as sellers feel more confident letting people into their homes, which has been reflected in an uplift in market appraisals and property enquiries.”