House Prices in UK Decline as Stamp Duty Holiday Ends

House prices in the UK fell unexpectedly in March as many purchases failed to complete prior to the end of the stamp duty holiday. Halifax, one of the country’s largest mortgage lenders, estimated that average house prices declined by 0.5 per cent compared to February. The average house price across the nation now stands at £296,699, down from £298,274 in the previous month.

Despite this drop, prices remain over £3,000 higher than levels observed in the summer of 2022, when the housing market experienced a post-lockdown boom. The annual rate of inflation remained unchanged at 2.8 per cent. Furthermore, Halifax revised down its estimate for a decrease in house prices in February from a previously reported drop of 0.1 per cent to a fall of 0.2 per cent.

Data from Nationwide, which measures house prices using a slightly different methodology, suggested that prices remained flat month-on-month. The anticipated changes to stamp duty appeared to discourage buyers in March, causing a slowdown in transactions as the deadline approached.

As of April 1, first-time buyers in England and Northern Ireland are now required to pay stamp duty on properties priced at £300,000, down from £425,000. Other homebuyers see the threshold for incurring stamp duty taxes drop from £250,000 to £125,000. Amanda Bryden, head of mortgages at Halifax, noted that new mortgage applications have slowed following a rush among buyers seeking to take advantage of the tax breaks introduced in 2022.

The future looks uncertain for potential buyers who now grapple with the challenge of higher borrowing costs, a limited supply of available properties, and an unpredictable economic landscape. Despite this, gradual improvements in mortgage affordability are expected due to anticipated base rate cuts and positive wage growth.

While some regions within the UK continue to experience growth, such as Northern Ireland at a rate of 6.6 per cent, London reported one of the lowest rates of house price inflation at just 1.1 per cent. Nonetheless, the capital remains the most expensive place to buy property, with average prices reaching £543,370.

Experts predict that the combination of pre-emptive purchasing to avoid increased stamp duty and the current economic uncertainties will keep housing demand subdued over the coming months.