House price rises have far out-stripped stamp duty savings

Another day, another house price record as the bull market continues.

The latest Halifax index shows prices surging 7.6 per cent to £253,243 in the year to the end of November, with the market in recent months at its strongest since 2004.

The biggest growth of this year has been since the market reopened after the Spring lockdown; prices since June have risen an average £15,000 or 6.5 per cent in six months.

Interestingly, for many these price rises have more than wiped out the typical savings from the stamp duty holiday.

Halifax managing director Russell Galley says: “With mortgage approvals at a 13-year high, the current market continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.

“And while industry data shows agreed sales and new instructions to sell fell to their lowest level in the past five months, both remain at historically high levels and well above seasonal norms.”

Galley says the 7.9 per cent rise is spurred by the stamp duty holiday, although he says: “The stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.

“The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year.

“However, the economic environment continues to look challenging. With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.”

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf says: “These latest figures show how resilient the housing market has been even at a time of further Covid restrictions and economic concerns. However, activity has reduced since, as Christmas is proving an even greater distraction.

“There is no real sign that home buying and selling won’t resume in the early new year, albeit at a slightly slower pace as the prospects of taking advantage of the stamp duty holiday recede.

“There have been few withdrawals from previously-agreed sales and prices are holding up well, supported by the continuing shortage of the right properties at the right prices in the right locations.”

“The stamp duty holiday ignited already strong post-lockdown demand and this, coupled with the desire of many people to relocate away from major cities in search of outdoor space, has driven prices higher.

“House price growth will almost certainly moderate in the first quarter and values will come under pressure if unemployment starts to rise sharply as expected.

“The number of major high street firms collapsing suggests house prices are in for a tough 2021. At lower loan to values, we’re not expecting the market to grind to a halt but for first time buyers and anyone with a smaller deposit it’s going to be challenging next year.”

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