Stamp Duty turbocharges house prices to another record high

House prices have soared 10.9 per cent in the past year - the highest level since 2014 - according to the Nationwide.

The average house price has risen to £242,832, up £23,930 over the past 12 months with the stamp duty and the pandemic-fuelled ‘race for space’ given the credit. 

"The market has seen a complete turnaround over the past 12 months" says Nationwide chief economist Robert Gardner, referring to the collapse in demand when the market closed during the first Coronavirus lockdown.

"But activity surged towards the end of last year and into 2021, reaching a record high of 183,000 in March" Gardner says.

He adds that the extension of the stamp duty holiday from its original end date of March helped to maintain momentum in the market, but it is not the key factor pushing up prices now.

"It is shifting housing preferences which is continuing to drive activity, with people reassessing their needs in the wake of the pandemic…The majority of people are looking to move to less urban areas” he suggests.

But Gardner cautions: "Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply, though even this could potentially be offset by ongoing shifts in housing preferences, if current trends are maintained."

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “These figures, though strong and coming on the back of last month’s fastest monthly rise since 2004, reflect market activity in the last few months when prices were turbo-charged by the extension of the stamp duty holiday, as well as continuing shortage of houses in particular, low mortgage rates and faster vaccine rollout. 

“Looking forward, these factors aren't likely to change anytime soon, even if demand cools a bit, which we are already starting to see. As a result, prices will soften but not correct and next month’s index is likely to show strong but more moderate growth.”