Annual price growth slowed to 5.7% in March compared to 6.9% in February in what analysts partly attribute to the original due date of the stamp duty holiday which since been extended
Earlier this year, there were reports that the UK housing market had lost its momentum. In March, it was confirmed by official figures that showed, for the first time in nine months, the housing prices had fallen in January.
As indicated by the latest House Price Index by Nationwide, in the UK, the annual house price growth was 6.9% in February and had slowed down to 5.7% in March.
According to Nationwide, in March, the house prices in the UK fell 0.2% month-on-month.
In the UK, over the first quarter of the year, London showed the weakest growth as compared to all other regions. By March, the average house price was pegged at £232,134. Separate ONS figures showed that London was also lagging in rents for housing.
However, the decline in prices was not uniform across the country. In some regions of the UK, an increase in demand led to a rapid escalation in prices. This is likely due to the lack of available properties at different price points.
In the first three months of 2021, the North-Western areas of the country was one of the best performing regions, with their average annual prices increasing by 8.2%.
According to analysts, the nearing deadline of the stamp duty holiday on property transactions was mainly responsible for the monthly decline. However, Rishi Sunak, the Chancellor of the Exchequer, decided to extend the tax break until 30 June.
Nationwide’s chief economist, Robert Gardner, says that in recent months, the performance of the wider economy and the labour market has been better than expected. This means that the slowdown of the housing market in March was probably just a “softening of demand” before the original due date of the stamp duty holiday.
Gardner further adds that the stimulus measures such as the furlough scheme’s extension, stamp duty benefits, as well as the introduction of a mortgage guarantee scheme, should help the housing market recover and remain buoyant over the next six months.
However, he also believes that if the labour market was to weaken by the end of 2021 due to the withdrawal of policy support, the housing market activity could slow down.
Guy Harrington, the chief executive of residential lender Glenhawk, says that the unsustainable levels of house price growth were fuelled by “pent-up demand” and government stimulus.
Anna Clare Harper, the chief executive of asset manager SPI Capital, points out the heavy mortgage lending as a reason. She goes on to explain that the extensive lending in recent times has directly influenced the affordability of houses.
Harper adds that, in the future, the extension of the temporary stamp duty reduction could boost the transactions and pricing of the housing market.
While this would benefit the housing market and the existing property owners, it could widen the inequalities and hinder first-time buyers’ affordability. The slight slowdown in house prices can be seen as a positive for this category of buyers.
