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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, mentioned lender Nationwide.
Home costs rose 0.4 per cent between January and February, taking the typical price to £270,493. The everyday home worth was 3.9 per cent increased than in February final 12 months, an annual development 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 aid seemingly led some patrons to carry ahead home purchases, boosting exercise and home worth inflation in early 2025,” mentioned Elliott Jordan-Doak, economist at Pantheon Macroeconomics. “So the market will seemingly soften considerably after April.”
However with actual wages persevering with to rise and unemployment staying low, “we stay comfy with our name for home costs to rise by 4 per cent 12 months over 12 months in 2025”, he added.
There was a noticeable pick-up in whole housing transactions within the second half of 2024, mentioned 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 mentioned.
Gardner added that he anticipated modifications to stamp obligation at first of April to “seemingly generate volatility” in transactions within the close to time period, as patrons carry ahead their purchases to keep away from the extra tax.
From April first-time patrons, for instance, will begin paying the levy for properties price £300,000 or extra, as a substitute 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 12 months as markets reassess how a lot the Financial institution of England will lower rates of interest.
Borrowing prices are nonetheless effectively under the height reached in summer time 2023.
The BoE has lower borrowing prices 3 times because the summer time of final 12 months and its benchmark price now sits at 4.5 per cent. Monetary markets anticipate two extra quarter-point price cuts by the tip of this 12 months.
“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,” mentioned 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 have been simply 1.2 per cent under their peak in summer time 2023, once they have been hit by traditionally excessive mortgage charges and falling family earnings.
The resilience in home costs is in distinction with subdued development, with the financial system failing to increase within the three months to September 2024 and rising solely 0.1 per cent within the closing quarter of final 12 months.
Company sentiment took a success after chancellor Rachel Reeves used her autumn Price range to set out greater than £40bn of tax rises, most of which can fall on companies from April. Client sentiment was additionally affected, prompting households to prioritise saving over spending.
Home costs started to rise once more final 12 months as mortgage charges fell and wages grew quicker than inflation. The typical home worth is now 25 per cent increased than in January 2020, earlier than the pandemic.
