UK Property Market: House price growth slows to 6.4%.
The price boom due to the stamp duty holiday begins to slow down.
Annual home price growth reached 6.4% in January 2021, representing a decrease from 7.3% in December, the Nationwide Home Price Index found.
Prices averaged £ 229,748 in January, after falling 0.3% month-over-month.
Robert Gardner, a chief economist at Nationwide, said: “To a large extent, the slowdown likely reflects a decline in demand before the end of the stamp duty holiday, prompting many people who were considering moving a home to advance their purchase.”
“While the stamp duty holiday will not expire until the end of March, activity is expected to weaken much sooner, given that the buying process generally takes several months (note that our house price index is based on in mortgage data approval stage).”
“The typical relationship between the housing market and broader economic trends has been broken in the last nine months. This is because the housing needs of many people have changed as a direct result of the pandemic, and many have chosen to move to less densely populated places or property types, despite the sharp economic slowdown and uncertain prospects.”
“In fact, the total number of mortgages approved for home purchases in 2020 actually exceeded the number approved in 2019, and growth in house prices ended 2020 in a six-year high, although the economy was probably around 10% smaller than at the beginning of 2020, with the unemployment rate around one percentage point higher”.
“The property market is returning to normal.”
There was a slight increase in the home ownership rate in 2020, to 64.6% from 63.8% in 2019, found the English Housing Survey published by the Ministry of Housing, Communities and Local Government (MHCLG).
Mark Harris, CEO of mortgage brokerage SPF Private Clients, said: “The runaway housing market is beginning to show the first signs that it is taking one foot off the gas. The annual growth rate slowed “modestly” in January, according to Nationwide, while prices fell 0.3% month-over-month.”
“It comes after an impressive performance in 2020, when the market’s remarkable resilience to the pandemic was evident, despite the first national lockdown.”
“The next few months will be interesting. As we approach the deadline to take advantage of stamp duty holidays, lenders are navigating a fine line between a need for volume and market share versus an appetite for risk and service.”
“There are a number of cuts and changes in rates and products as lenders face unprecedented circumstances. However, since interest rates are unlikely to go up anytime soon, mortgage rates should remain competitive.“
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