UK house price growth slowed considerably in December, suggesting the sector’s “party is winding down” as the end of a stamp duty holiday nears, according to a bank’s monthly survey.
The Halifax house price index rose 0.2 per cent in December compared with the previous month, down from a 1 per cent increase the previous month. It was the lowest rise since June and less than the 0.5 per cent growth forecast by economists polled by Reuters.
Jonathan Hopper, chief executive of estate agent Garrington Property Finders, said: “December’s sharp deceleration in price growth — down to the lowest monthly level seen in six months — suggests the party is winding down.”
Compared with the same month last year, house prices in the UK were 6 per cent up, reflecting the strong rebound in the housing market since the introduction of the stamp duty holiday for the first £500,000 of residential property purchases, which was introduced in July and lasts until March.
However, the annual rate was down from 7.6 per cent in the previous month.
Andrew Wishart, property economist at consultancy Capital Economics, said that, with the government support due to be withdrawn in the second quarter, “we think that house prices will reverse most of their 2020 surge this year”.
Despite the cooling, the year ended with average house prices rising to a record high of £253,374, following the six-month boom, according to Halifax.
Nicky Stevenson, managing director at national estate agent group Fine & Country, noted that it was “very unusual” to reach a record high in December, when there is traditionally less market activity.
Russell Galley, managing director at Halifax, said that last year was “a tale of two distinct halves for the housing market”. After a sharp contraction during the spring lockdown, since July “prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday”.
The UK housing market has repeatedly surprised economists in recent months and mortgage approvals soared in November to the highest level since 2007, according to official statistics published by the Bank of England this week.
On Thursday, the IHS/Markit purchasing managers’ index for construction, an index of the health of the sector, showed growth continuing strongly in December.
Tom Bill, head of UK residential research at estate agent Knight Frank, said he expected house prices to be “largely flat” over the course of 2021, as a result of the end of the stamp duty holiday and because the third national lockdown means some sellers may be inclined to hold off until spring.
Separate house price data released by the Nationwide building society last month also showed the monthly growth rate slowed in December, to 0.8 per cent from 0.9 per cent in November. However, its annual growth rate increased to a six-year high in December.
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