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UK home costs outpaced forecasts in February because the property market confirmed “resilience” within the face of affordability pressures and patrons tried to get forward of stamp obligation modifications taking impact in April, stated lender Nationwide.
House prices rose 0.4 per cent between January and February, taking the common price to £270,493. The everyday home value was 3.9 per cent larger than in February final yr, an annual progress price that was barely down from 4.1 per cent in January.
Economists polled by Reuters had anticipated a 0.2 per cent month-on-month rise and a 3.4 per cent annual enhance.
“The looming April finish to stamp obligation threshold reduction possible led some patrons to convey ahead home purchases, boosting exercise and home value inflation in early 2025,” stated Elliott Jordan-Doak, economist at Pantheon Macroeconomics. “So the market will possible soften considerably after April.”
However with actual wages persevering with to rise and unemployment staying low, “we stay snug with our name for home costs to rise by 4 per cent yr over yr in 2025”, he added.
There was a noticeable pick-up in complete housing transactions within the second half of 2024, stated Robert Gardner, Nationwide’s chief economist, up 14 per cent in contrast with the identical interval in 2023.
“Housing market exercise has additionally remained resilient in current months, regardless of ongoing affordability challenges,” he stated.
Gardner added that he anticipated modifications to stamp obligation initially of April to “possible generate volatility” in transactions within the close to time period, as patrons convey ahead their purchases to keep away from the extra tax.
From April, first-time patrons, for instance, will begin paying the levy for properties value £300,000 or extra, as an alternative of £425,000 at current.
Actual wages rose on the quickest tempo since 2021 within the final three months of 2024, whereas mortgage charges have fluctuated over the previous yr as markets reassess how a lot the Financial institution of England will minimize rates of interest.
Borrowing prices are nonetheless nicely under the height reached in summer time 2023.
The BoE has minimize borrowing prices 3 times because the summer time of final yr and its benchmark price now sits at 4.5 per cent. Monetary markets anticipate two extra quarter-point price cuts by the top of this yr.
“As rates of interest fell by final summer time and into the autumn, the housing market kicked into gear, however mortgage charges have risen over the past three months as monetary markets now anticipate fewer rate of interest cuts than they did in late summer time,” stated Matt Swannell, economist at consultancy EY ITEM Membership.
“Nonetheless, housing demand has held up over the previous few months as patrons have prioritised finishing earlier than the stamp obligation thresholds fall again to regular ranges on the finish of March,” he added.
Nationwide knowledge confirmed UK home costs had been simply 1.2 per cent under their peak in summer time 2023, after they had been hit by traditionally excessive mortgage charges and falling family earnings.
The resilience in home costs is in distinction with subdued progress, with the economic system failing to increase within the three months to September 2024 and rising solely 0.1 per cent within the closing quarter of final yr.
Company sentiment took a success after chancellor Rachel Reeves used her autumn Finances to set out greater than £40bn of tax rises, most of which is able to fall on companies from April. Shopper sentiment was additionally affected, prompting households to prioritise saving over spending.
Home costs started to rise once more final yr as mortgage charges fell and wages grew sooner than inflation. The common home value is now 25 per cent larger than in January 2020, earlier than the pandemic.
