The housing market slowed in February as experts warned that buyers were out of time to beat the upcoming stamp duty deadline, unless they had already started the conveyancing process.
House prices fell by 0.1% on a monthly basis, according to mortgage lender Halifax, after growing 0.6% in January. Annual house price growth held steady at 2.9%, unchanged from January.
This takes the average price of a UK property to £298,602, compared to £298,815 last month, Halifax’s house price index showed.
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“February's figures highlight the delicate balance within the UK housing market,” said Amanda Bryden, the bank’s head of mortgages.
“While there’s been talk of a last-minute rush on new mortgages ahead of the changes to stamp duty, inevitably we’ve seen some of the demand that was brought forward start to fade as the April deadline ticks closer, given the time needed to complete a purchase,” she added.
Despite this, the housing market remains resilient for now. Interest rates are expected to fall further this year, which should translate into further mortgage rate cuts. Although rates remain significantly higher than their long-term average, sub-4% deals returned to the market earlier this year.
Affordability remains stretched but improved slightly last year as wage growth outpaced house price inflation. All of this is supporting decent activity levels, which Halifax describes as comparable to before the pandemic.
Going forward, the bank expects a supply and demand imbalance to push prices higher.
“While affordability challenges persist, the ongoing shortage of housing supply coupled with sustained demand suggests property prices will continue to rise this year, albeit at a more measured pace compared to last year,” Bryden said. For context, Halifax recorded house price growth of 3.3% across the UK last year.
Forecasts from other property experts vary. Estate agent Savills expects UK house prices to rise by 4% overall in 2025, with the fastest growth coming in the North West, the North East, Yorkshire and the Humber, and Scotland.
Real estate consultancy Knight Frank is forecasting a lower growth rate of 2.5%.
What is changing with stamp duty?
Homebuyers have benefitted from lower stamp duty costs in recent years, but the thresholds for the controversial property tax are due to drop at the start of April. This means buyers will pay more when completing a purchase.
Since October 2022, stamp duty has only been due on homes worth more than £250,000, or £425,000 for first-time buyers. However, these thresholds will drop back to their original levels from 1 April – £125,000 for regular buyers and £300,000 for first-time buyers.
At the end of January, property website Zoopla warned that it is now “too late for buyers to agree and complete on a property purchase” before the deadline, if they haven't already started the process.
Nationwide’s chief economist Robert Gardner has said we could see a jump in transactions in March as the final buyers complete before the deadline, followed by a “corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes”.
Halifax’s data suggests we could be starting to see the slowdown already before the deadline has even passed.
Where are house prices rising fastest?
Of the UK nations, Northern Ireland remains the country with the fastest annual house price growth. Prices rose by 5.9% on an annual basis in February, taking the average property to £205,784. The growth rate was largely unchanged compared to January.
Scotland saw annual growth of 3.8%, up from 2.5% in January, taking the average house price to £213,014.
In Wales, prices rose by 2.8% annually, taking the average price to £226,811.
England has seen a north-south divide in recent years when it comes to house price growth, as affordability limits have become stretched in the south. Yorkshire and the Humber recorded the fastest growth in England in February, with prices up 4.1% annually. The average property in the region now costs £216,130.
In London, house prices rose by 1.6% on an annual basis in February, down from 2.6% in January. The average property in the capital costs £545,183.
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