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House price growth slows after eight-month upwards trend

House price growth slows after eight-month upwards trend

UK house price growth slowed in April, breaking its eight-month long upwards trend following the government’s stamp duty break implemented in July.

Between March and April this year, average house prices on a seasonally adjusted basis fell by 2.2 per cent. 

This follows an increase of 2 per cent the previous month, according to the Office of National Statistics’ latest house price index.

With buyers’ overall costs reduced until June 30 when the stamp duty holiday threshold lowers to £250,000, sellers have been able to request higher prices. 

The average UK house price was £251,000 in April. This is £20,000 higher than the same month last year, but £4,935 less than in March 2021.

"Since April, we have seen a shift in enquiries from frantic home movers trying to benefit from the stamp duty holiday to more laid back first-time buyers waiting for the ideal property to come onto the market,” Robert Payne, co-founder of Bristol-based Langley House Mortgages, said.

Estate agent Chestertons said its viewings have been at a five-year high for the past three months - June, May, and April. 

“This has led to competitive bidding but with supply meeting demand, large price increases have been kept at bay,” Chestertons’ CEO, Guy Gittins, said.

Despite house prices being up 8.9 per cent year-on-year, some in the sector are wary that demand will slow post-June when the stamp duty incentive is reduced in a staggered return to previous stamp duty rates.

“House prices are increasing dramatically year on year, suggesting a buoyant market,” said Rob Barnard, Masthaven Bank’s intermediaries director.

“However, the reality is that the figures mask an underlying fragility. Government initiatives have been effective at fuelling much of the activity in the property market despite intermittent lockdowns and economic uncertainty. But June 30 is nearly upon us and the removal of such government stimulus could result in market volatility.”

Some are not so quick to share their bets on the market’s trepidatious future performance, however. “As the stamp duty holiday approaches, we are really waiting to see if the house price growth continues, plateaus or falls across June, July and into summer,” said Jamie Johnson, FJP Investment’s CEO.

Whilst others reckon those people waiting for a correction in prices or a crash will be disappointed.

“The rate of growth is simply likely to slow rather than prices drop,” Lewis Shaw, founder of Mansfield-based Shaw Financial Services, predicted.

RIC’s former residential chairman, Jeremy Leaf, agreed that “some price softening” might occur, rather than a full correction.

But he added the ability for first-time buyers to get onto the property ladder should be “of more concern” to the mortgage market.

“The market resurgence has been driven by equity rich homeowners at the expense of those who are finding it even more difficult to raise deposits,” he said.

Recent research by Santander has shown 44 per cent of the UK’s first-time buyers delayed buying their first home last year due to the pandemic-induced rise in deposit requirements.