12 hours ago
House prices fall at sharpest pace in four years in wake of stamp duty raid
House prices in the UK fell at their sharpest pace in nearly four years after a temporary cut to stamp duty for cheaper properties came to an end.
Between April and March, the average UK property dipped 2.8pc in value to about £265,000, according to the Office for National Statistics (ONS).
On April 1, the stamp duty discount ended, meaning the threshold at which buyers start paying the levy was reduced to £125,000 from £250,000.
For first-time buyers in England, the threshold for not paying stamp duty was also reduced from £425,000 to £300,000.
It is the steepest decline in monthly house prices since July 2021 when house prices also fell after another stamp duty holiday finished in June that year.
Elliott Jordan-Doak, a senior UK economist at Pantheon Macroeconomics, said: 'April was the first month that completed mortgages were subject to the higher stamp-duty costs, but we think the fall in house prices was driven by an unwind of activity brought forward, rather than higher taxes hitting demand.'
He added that the slowdown in prices is 'expected to be brief' as the housing market normalises in the coming months.
London was the only region in England to report an increase in house prices between April and March, with prices rising by 2.3pc in the capital. By contrast, the North East recorded the largest monthly slump as house prices fell 7.4pc.
Annual house price growth slowed to 3.5pc in April, down from 7pc in March as home buyers rushed to complete their purchases before the tax holiday came to an end.
The stamp duty reduction was introduced by Liz Truss in her mini-Budget in September 2022, but was scrapped just weeks later by Jeremy Hunt in his autumn Budget.
The latest house price data comes as stubborn inflation continues to cause headaches for the Bank of England.
The Bank's Monetary Policy Committee (MPC) is expected to hold rates at 4.25pc on Thursday, dashing hopes for prospective buyers hoping for a reduction in borrowing costs.
'New highs'
Last month, the MPC voted to cut the bank rate by 0.25 percentage points from 4.5pc to 4.25pc. However, traders have priced in just one more cut in 2025.
Ashley Webb, UK Economist at Capital Economics said he expects 'housing transactions to recover to their pre-pandemic levels and house prices to reach new highs even though mortgage rates will remain higher over the next few years than before the pandemic'.
Mr Webb said the strong demand from homebuyers is expected to be supported by borrowers increasing the length of their mortgage term, supporting a continued rise in prices.
'Overall the increase in mortgage terms and looser lending standards has led to a shift in the relationship between housing transactions/prices and mortgage rates that probably has a bit further to run,' he said.
