There has been encouraging news for house buyers in the UK with property prices falling on average by nearly £3,000 over the last fortnight. It is to tempt buyers to squeeze in a purchase before the end of the stamp duty holiday on March 31.
Prior to that, with 2020 ending on a record high, property prices in Britain, at one point, had been set to grow an average of four per cent this year, despite the looming end of the tax break and forecasts of rising unemployment.
But now, according to leading estate agents prices this year are likely to remain flat.
Online property firm, Rightmove said asking prices for the property advertised in November and December were 6.6 per cent higher than a year earlier, after people “reprioritised housing needs high on their life agendas” during the pandemic.
Britain’s housing market had received an unexpected boom after the first raft of COVID restrictions were lifted in June, as people sought better houses and jumped on a temporary reduction in purchase taxes.
In July, the government had announced a stamp duty holiday for properties purchased for under £500,000, leading to a build-up of transactions over the last few months as buyers rushed to complete sales before the deadline.
Rightmove had said last month – prior to the latest price reduction – underlying demand and cheap borrowing costs were unlikely to dampen activity.
“There’s likely to be a lull in quarter two unless the stamp duty holiday is extended, but for many buyers, its removal will not be make or break, though may lead them to reduce their offers to a degree,” Rightmove’s director of property data, Tim Bannister, said. He added: “Our 2021 forecast of a 4 per cent (now revised down) price rise is more conservative than the unsustainable 6.6 per cent national average seen in 2020.”
The Bank of England in October reported that lenders approved the highest number of new mortgages since 2007, while mortgage lender Halifax said house prices had risen by the most since 2004 in the five months since the earlier lockdown ended.
Jeremy Leaf, London estate agent and a former RICS residential chairman, said: “At the coalface, we are experiencing much the same but expecting a busy first quarter as buyers and sellers rush to take advantage of the stamp duty concession.”
He added: “However, we don’t anticipate a cliff-edge scenario at present. Nearly all sales agreed seem to be proceeding to exchange of contract, unless exceptional circumstances prevail and prices are not being widely renegotiated in anticipation of a market fall due to Brexit, the pandemic or potentially worsening economic news.”
The rise in house prices had been faster than expected, particularly in December, to record their biggest annual increase in six years, according to Nationwide data this month.
After a collapse in house purchases during the first months of lockdown, there had been a surge in demand, driven in part by the temporary exemption of Stamp Duty. More UK mortgages were approved in November than for any month since before the 2008 global financial crash.
UK banks signed off on more than 100,000 new mortgages in November. The new home lending defied expectations of a slowdown in the housing market boom that started after the first COVID-19 lockdown.
Bank of England showed UK banks approved 104,969 mortgages in November, up from 98,338 the previous month.
Effective interest rates on new mortgage borrowing ticked up to 1.83 per cent. This was despite England being in a national lockdown for most of November and December.
(The writer is our foreign correspondent based in the UK)
Andy Jalil
andyjalil@aol.com
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