News – House prices fall as stamp duty holiday ends

House prices fall as stamp duty holiday ends

The slide left the average home in England and Wales costing £164,450

House prices fell by 0.3% during February as the property market suffered a slowdown following the end of the stamp duty holiday, figures showed today.

The slide, which was the first price fall for 10 months, left the average home in England and Wales costing £164,455, according to the Land Registry.

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The drop is likely to have been caused by the end of the Government’s stamp duty holiday in December, which had caused people buying lower value properties to rush through purchases before the end of the year.

Both Nationwide and Halifax reported price falls for February of 1% and 1.5% respectively, as activity in the market was also hit by bad weather during January.

But the Land Registry figures also contained more positive news on the market, with annual house price inflation rising to 7%, its highest level since November 2007.

There was also a 25% jump in the number of homes that changed hands during December, the latest month for which figures are available, pushing up transaction levels to a two-year high of 73,889, although the figures are likely to have been boosted by the looming end to the stamp duty holiday.

Figures from HM Revenue & Customs also showed a spike in transaction volumes during December, with 103,000 homes worth more than £40,000 sold during the month.

But the figure halved to 51,000 in January and remained low at 58,000 in February.

It remains to be seen whether the dip in activity during the early part of this year was caused by one-off factors, such as the weather and the end of the stamp duty holiday, or whether it marks the start of a new trend in the housing market.

Howard Archer, chief UK and European economist IHS Global Insight, said: “The Land Registry data add to the evidence that house prices and activity have faltered early in 2010.

“We suspect that house prices will be erratic and prone to corrections in 2010, and will probably be no better than flat over the year.”

Five regions of England and Wales saw price falls during February, with Wales suffering the steepest slide of 2.4%, followed by the North East at 2.1%, according to the Land Registry.

But prices also fell in London and the South East, which had been powering the housing market recovery, with the cost of property in these regions dropping by 0.5% and 0.7% respectively.

At the other end of the scale, house prices soared ahead by 3.6% in the North West, while Yorkshire and the Humber saw rises of 1.2%.

Annual house price growth was positive in all regions apart from the North East, where prices are still 2.3% lower than they were in February 2009.

London saw the strongest growth during the 12 months at 11.9%, followed by the South West at 9.8% and the South East at 9.4%.

Meanwhile, the National House Building Council (NHBC) said the number of new homes which were registered by builders during February jumped by 73% compared with the same month of 2009.

Applications to build new homes also rose by 66% during the three months to the end of February, compared with a year earlier, to 24,105.

But it warned that, despite the increase, building levels were still 40% down on their pre-recession levels.

Imtiaz Farookhi, chief executive of NHBC, said: “As we enter the spring building season, there is a cautious optimism about the signs of improvement across the housing market, and more so since the stamp duty announcements in this week’s budget.

“However, nobody should under-estimate the challenge in providing the UK with the number of new homes it requires.

“Even at its peak the UK was not producing enough homes and, although our figures show that the recovery seems to be continuing, we are still today producing considerably fewer homes than three years ago.”

The group said the recovery in building levels was spread evenly across the UK, with all regions apart from the North West seeing a year-on-year rise in registrations during the three months to the end of February.

The increase is being driven by private sector builders, whose applications to build new homes have risen by 110% during the past year, while public sector ones are up by just 13%.