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UK home costs outpaced forecasts in February because the property market confirmed “resilience” within the face of affordability pressures and consumers 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 typical price to £270,493. The standard 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 improve.
“The looming April finish to stamp obligation threshold aid possible led some consumers to convey ahead home purchases, boosting exercise and home worth 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 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 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 in the beginning of April to “possible generate volatility” in transactions within the close to time period, as consumers convey ahead their purchases to keep away from the extra tax.
From April first-time consumers, 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 12 months as markets reassess how a lot the Financial institution of England will reduce rates of interest.
Borrowing prices are nonetheless effectively beneath the height reached in summer season 2023.
The BoE has reduce borrowing prices 3 times because the summer season 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 top of this 12 months.
“As rates of interest fell via final summer season 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 season,” stated Matt Swannell, economist at consultancy EY ITEM Membership.
“Nonetheless, housing demand has held up over the previous few months as consumers 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 beneath their peak in summer season 2023, once they had been hit by traditionally excessive mortgage charges and falling family earnings.
The resilience in home costs is in distinction with subdued development, with the economic system failing to develop within the three months to September 2024 and rising solely 0.1 per cent within the ultimate quarter of final 12 months.
Company sentiment took a success after chancellor Rachel Reeves used her autumn Funds to set out greater than £40bn of tax rises, most of which is able to 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 sooner than inflation. The typical home worth is now 25 per cent increased than in January 2020, earlier than the pandemic.
