Halifax: Housing market softens as buyers give up on stamp duty holiday

The latest data and analysis from Halifax this morning has revealed that house prices, although still relatively strong, have softened slightly in February with a 0.1% dip against the previous month.

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Property Reporter
5th March 2021
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The data shows that during the latest quarter (December to February) house prices were 0.5% higher than in the preceding three months (September to November).

The year-on-year numbers revealed that house prices remain in a strong position at 5.2% higher than in February last year.

Russell Galley, Managing Director, Halifax, said: “Having enjoyed an extremely strong period of activity in the second half of last year, the housing market continued its softer start to 2021, with average prices down very slightly (-0.1%) compared to January. However, with annual house price inflation currently at +5.2%, property values remain comfortably higher than 12 months ago, when February was the last full month before lockdown.

“The housing market has been at something of a crossroads at the start of this year, with upcoming events key to determining the path of activity and prices over the next few months. The government’s decision to extend the stamp duty holiday – one of the main drivers of demand from home movers during the pandemic – has removed a great deal of uncertainty for buyers with transactions yet to complete.

“The new mortgage guarantee scheme is another welcome development from this week’s Budget. Whilst mortgage approvals have reached record highs in recent months, hitting levels not seen since before the financial crisis of 2008, raising a deposit continues to be the single biggest hurdle for first-time buyers to overcome.

“In the longer-term, the performance of the housing market remains inextricably linked to the health of the wider economy. The pace and extent of recovery are still highly uncertain, and much will depend on the ongoing success of the UK’s vaccination roll out.

“Though there is the likelihood of an economic ‘bounceback’ from lockdown, with households not unduly impacted by the pandemic deploying the significant reserves of savings that they have built-up, higher unemployment is likely to limit new buyer demand. Therefore, we would not expect the level of growth seen in house prices over the past year to be sustained throughout 2021.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: "The housing market softened slightly in February as it seemed too late for buyers to take advantage of the stamp duty holiday. But with the Chancellor announcing an extension to the concession in his Budget, more buyers are realising they could still reasonably expect to take advantage of the tax break, which will further help the market's momentum.

"The introduction of 95 per cent mortgages backed by the government from next month will also give first-time buyers and home movers a boost. We have seen a flurry of enquiries from those who were planning to utilise the Help to Buy scheme who are now keen to buy older housing stock rather than new-build options. With the big lenders confirmed as offering the first 95 per cent products, we look forward to seeing terms and pricing sooner rather than later."

Anna Clare Harper, chief executive of asset manager SPI Capital, says: "According to the Halifax, annual house price growth slowed by 0.1% in February, bringing annual price growth to 5.2%. It is likely that this slowdown reflects some buyers giving up hope as they neared the original end to the temporary stamp duty reduction.

"Stamp duty has a more than proportionate impact on transactions because affordability is not just about the price of a property. It is heavily influenced by mortgage lending. Investors and homebuyers can borrow against the property price, but they cannot use finance to fund transaction costs.

"Looking to the future, the extension to the temporary stamp duty reduction is likely to boost the housing market in terms of transactions and pricing. This is positive news, as house price growth both reflects and boosts confidence. The ‘tapering’ down of this measure from September will help to avoid a housing market ‘cliff edge’.

"At the same time, we are now beginning to see appetite from international investors picking up, which is expected to continue through 2021. In times of global uncertainty, people want to put their money in a stable asset with low volatility and residential property in the UK has a ‘bond-like’ appeal internationally.

"Other important drivers of the housing market through 2021 include cheap debt as a result of very low-interest rates, which give buyers a ‘discount’; the continued desire to improve surroundings among existing homeowners; and the ‘flight to safety’ amongst all kinds of investors, both UK-based and overseas."

Nigel Purves, CEO of Wayhome, comments: “Over the course of last year, we’ve all become much more aware of our living space, ensuring it meets our remote working needs now and as we adapt to a more hybrid style of working for the future. For some, this has created a sense of urgency to climb up the property ladder to find a more suitable home altogether. Indeed, despite the market having a bit more of a gradual start this year, house prices were still 5.2% higher last month, compared to February 2020.

“Following the Budget and the Chancellor’s 95% mortgage guarantee, there are some would-be buyers who will see this as a useful stepping-stone. However, many will find that their household income falls short of the criteria which lenders use to grant that mortgage, even if they can afford the deposit or a similar amount in rent each month. If the Government is truly committed to turning Generation Rent into Generation Buy, it must work together with the property industry to find alternative ways to help people find a property.”

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