The average UK house price fell in January compared to December in an early sign that the market could be beginning to cool, the Halifax revealed today. 

According to its monthly house price index, values dropped by 0.3 per cent to £251,968. However, the property market was still up 1.6 per cent on the quarter and 5.4 per cent annually.

So although the typical home is still worth £13,000 more than it was a year ago, it was the biggest monthly decrease since April 2020, when the housing market closed for eight weeks due to the first national lockdown.

Average UK house prices dropped for the first time in six months in January to £251,968

Average UK house prices dropped for the first time in six months in January to £251,968

Average UK house prices dropped for the first time in six months in January to £251,968

Until January, house price growth had been climbing steadily each month since July. This was a result of pent-up demand among home buyers after the first national lockdown, combined with the positive effect that chancellor Rishi Sunak’s stamp duty holiday had on the market.

The stamp duty holiday, which saves buyers up to £15,000 by eliminating the tax on the portion of the purchase under £500,000, is scheduled to end on 31 March. 

With the average home transaction taking around three months to complete many buyers now feel that they have missed the boat, with some holding on in the hope that the Chancellor will extend the holiday.

Continued growth at the end of 2020 meant that prices still increased quarter-on-quarter in January, however.

In the three months between November and January, they were 1.6 per cent higher than they were in the three months between August and October.

While the average house price grew year on year, it has dropped since November

While the average house price grew year on year, it has dropped since November

While the average house price grew year on year, it has dropped since November 

As of December, transaction numbers in the UK housing market were still on the rise

As of December, transaction numbers in the UK housing market were still on the rise

As of December, transaction numbers in the UK housing market were still on the rise 

According to the Halifax index, house prices also remained significantly higher than they were this time last year in January, sitting 5.4 per cent above January 2020 levels.

While some indicators still show growth, particularly in December, there are signs that demand in the market is beginning to fall away following 2020s ‘mini boom’.

HMRC data has shown that transaction levels continued to rise in December, for the eighth consecutive month, increasing by 13.1 per cent compared to November.

Running out of steam? January's house price fall was the first since July 2020

Running out of steam? January's house price fall was the first since July 2020

Running out of steam? January’s house price fall was the first since July 2020 

However, Bank of England figures have revealed that mortgage approvals fell in December for the first time in seven months, declining by 1.8 per cent month-on-month to 103,381.

Russell Galley, managing director, Halifax, said: ‘There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August. 

‘The stamp duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.

‘How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.

‘That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.’

Stamp duty extension debate brings uncertainty 

Uncertainty about what the future held may have been another reason why price growth slowed. 

Tom Bill, head of UK residential research at estate agent Knight Frank, said the market hit ‘peak uncertainty’ last month as Covid restrictions were heightened and MPs debated whether or not to extend the stamp duty holiday. 

House prices may have fallen further had lockdown not restricted the homes available

House prices may have fallen further had lockdown not restricted the homes available

House prices may have fallen further had lockdown not restricted the homes available  

The Government did not confirm whether this was something it was considering, and buyers are likely to have to wait until the Budget on 3 March to find out.   

‘The sensible option would be to taper the holiday and avoid any cliff-edge moments for the housing market or wider economy, particularly given how important the mobility of labour will be in coming months,’ said Bill. 

‘We expect prices to end the year flat as demand becomes steadier and more seasonal in the second half of this year.’ 

Nicky Stevenson, managing director at national estate agent group Fine & Country, said that the introduction of the third national lockdown may have stopped prices from falling further.  

‘The lockdown is playing its part in keeping prices as high as they are because it has reduced supply, fuelling greater competition among buyers for what is available,’ she said.  

‘The stamp duty holiday has now faded as a force behind agreed sale prices, though some buyers with smaller chains are still hoping to complete before the deadline.’

247newsaroundtheworld

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