UK house prices fall as stamp duty hits demand
Property prices fell by 0.8 per cent month-on-month to £271,619 in June, according to the Nationwide house price index, a sharper-than-expected fall than economists had forecast and marking the biggest monthly decline since February 2023.
The annual rate of house price growth slowed to 2.1 per cent in June, from 3.5 per cent a month earlier.
Robert Gardner, Nationwide's chief economist, said: 'The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April.'
Changes to stamp duty mean that now housebuyers in England and Northern Ireland pay the tax on properties over £125,000, rather than over £250,000, as was the case previously. First-time buyers also have to pay stamp duty on houses costing more than £300,000. Prior to the change in April, first-time buyers did not have to pay stamp duty for properties costing below £425,000.
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However, Gardner believes that despite 'ongoing economic uncertainties in the global economy,' activity is expected to pick up as the summer progresses 'since underlying conditions for potential buyers in the UK remain supportive'.
He said the unemployment rate remains low, wages are rising after stripping out inflation and borrowing costs are likely to fall in the coming quarters.
Other measures of Britain's housing market have illustrated a mixed picture after the expiry of a temporary discount on stamp duty for first-time buyers ended in April.
Data from the Bank of England showed lenders approved more mortgages than expected in May, helped by lower interest rates.
The Bank of England held interest rates at 4.25 per cent last month, and investors expect the central bank to reduce borrowing costs in two further quarter-point moves to 3.75 per cent by the end of the year.
Anthony Codling, an analyst at RBC, believes that while 'the weakness in June may reflect the market adjusting to higher stamp duty costs, but the outlook seems firmer to us, real wages continue to rise, unemployment remains low, and Bank rate is likely to fall further in the coming months.'
Tom Bill, head of UK residential research at Knight Frank, said: 'The legacy of the March stamp duty cliff edge is high supply and softer demand, which is putting downward pressure on house prices. We think there will be modest single-digit house price growth by the end of the year, but if you are planning to sell over the next few months, asking prices will need to reflect the fact that it is very much a buyers' market.'
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