Housing market in ‘surprise’ rebound

Housing market in ‘surprise’ rebound
Credit: Chris Ratcliffe/Bloomberg

A rebound in the annual rate of house price growth in February has been described as a “surprise” ahead of the stamp duty holiday deadline next month.

Annual house price growth rebounded to 6.9 per cent last month, according to Nationwide’s house price index published today (March 2).

It comes after its previous index showed growth had slowed to 6.4 per cent for the first time in six months in January.

On a monthly basis, house prices rose by 0.7 per cent, after taking account of seasonal effects, more than reversing the 0.2 per cent monthly decline recorded in January.

The average price of £231,061 recorded in February was the highest on record, and followed an average price of £229,748 in January.

Robert Gardner, chief economist at Nationwide, said: “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 (note that our house price index is based on data at the mortgage approval stage).”

He added: “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.”

Tomer Aboody, director of property finance lender MT Finance, said an increase in house prices last month ‘confirmed’ that demand for greater space outweighed any potential stamp duty savings.

He said: “The continuation of interest and demand in the market suggests that buyers are prepared to miss the deadline and pay the duty if it means getting that new home.

“Many properties have already increased in value over the past 12 months, making the stamp duty saving less relevant anyhow.”

Mark Harris, chief executive of SPF Private Clients, predicted further increases in house prices.

He said: “The Chancellor’s expected Budget announcement on 95 per cent mortgages and an extension to the stamp duty holiday will only fuel demand and activity, in all likelihood pushing prices up higher.”

A mortgage guarantee scheme aimed at small deposit buyers is expected to be announced by the Chancellor in this week’s Budget.

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