Market News

BY Pedro Goncalves · Finance Reporter, Yahoo Finance UK

UK house prices were flat in March and the market is likely to stay soft as the stamp duty tax break comes to an end.

The average UK house price registered no growth between February and March, leaving the average cost of a home at £271,316, according to lender Nationwide.

The annual growth rate also held at 3.9%, although significant regional disparities were evident. In Northern Ireland, annual price growth accelerated to 13.5%, the highest in the region since 2021. Scotland saw a 3.9% increase, while Wales followed closely with a 3.6% rise.

London, however, recorded the lowest annual price growth across the UK, with the rate dipping to 1.9% from 2%. It remained the most expensive place to buy a home, with an average price of £529,369. Northern Ireland was the most affordable, with an average price of £205,796.

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Robert Gardner, Nationwide’s chief economist, said: “These price trends are unsurprising, given the end of the stamp duty holiday at the end of March.

“Indeed, the market is likely to remain a little soft in the coming months since activity will have been brought forward to avoid the additional tax obligations – a pattern typically observed in the wake of the end of stamp duty holidays.”

Gardner also suggested that activity might pick up steadily as the summer progressed, despite broader economic uncertainties. He explained: “Underlying conditions for potential home buyers in the UK remain supportive.

“The unemployment rate is low, earnings are rising at a healthy pace in real terms (after accounting for inflation), household balance sheets are strong, and borrowing costs are likely to moderate a little if [the Bank of England base rate] is lowered further in the coming quarters, as we and most other analysts expect.”

The pause of the stamp duty levy, initially introduced in September 2022 amid rising mortgage rates, ended in March. Starting today, April 1, house purchases for first-time buyers will be subject to the duty on properties priced at £300,000 or more, down from the previous threshold of £425,000. Similar changes will apply to non-first-time buyers.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “This will affect first-time buyers the hardest, who may have to find thousands of pounds, in addition to their deposit, to pay their property taxes if the home they want to purchase costs more than £300,000.

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“Existing homeowners looking to upsize or downsize will also be liable for a bigger tax bill, something that already appears to be having a dampening effect on the market. Mortgage approvals started to fall in January, dipping again in February to the lowest number since August last year, as the window to secure lower transaction costs started to narrow.”

Bank of England data released on Monday showed a cooling in mortgage approvals in February, while the Royal Institution of Chartered Surveyors reported that its members had observed a slowdown in house price growth.

Markets are anticipating that the Bank of England will cut interest rates twice more this year, following three rate reductions since the summer.

Nathan Emerson, chief executive of property professionals’ body Propertymark, said: “Although we now sit at the very start of the amended stamp duty thresholds for people across England and Northern Ireland, we remain optimistic to see strong market momentum across the entire UK, as we head towards the traditionally busy summer months.”