Halifax research shows that in the latest quarter (November to January) house prices were 1.6% higher than in the preceding three months (August to October) and 5.4% higher than in January 2020.
Russell Galley, Managing Director, Halifax, explains: “The average UK house price slipped by -0.3% in January, the biggest monthly fall since April last year. Whilst this pushed the typical property value down to its lowest level since October, at just under £252,000, prices are around £13,000 higher than a year ago.
“There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August. Industry figures for agreed sales remain well above pre-pandemic levels but new instructions to sell have decreased noticeably, and total stock held by estate agents has risen to its highest level since before the EU referendum in 2016.
“The stamp duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.
“How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.
“That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.”
Anna Clare Harper, chief executive of asset manager SPI Capital, says: "House price growth may have slowed to 5.4% in the year to January 2021 but it is still a significant rate of growth, in particular, compared to many other more volatile or low return assets.
"There’s been three major drivers of house price rises in 2020: the temporary stamp duty reduction, cheap debt as a result of very low-interest rates, and the release of pent-up supply and demand and desire to improve surroundings.
'The temporary stamp duty reduction has had a more than proportionate impact on prices, since buyers using mortgages can take debt out on the property price, but cannot include transaction costs. The slowdown we are now seeing in house price growth reflects the looming end to this incentive.
"Looking to the future, when (assuming) the temporary stamp duty reduction ends, we’re likely to see a slowdown in house price rises. Challenging economic conditions make potential home buyers less willing and able to buy.
"The good news for the property market is that throughout market cycles and changes, house prices in the UK have historically remained stable. Typically, house prices will rise more slowly rather than falling, in the majority of locations, since we all need a roof over our heads and supply of new homes is limited."
