Halifax has reported that the average UK house price fell by -0.3% in January, the biggest monthly fall since April 2020.
The typical property value is down to its lowest level since October, at just under £252,000, but prices are around £13,000 higher than a year ago.
Russell Galley, managing director of Halifax, said: “There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August. Industry figures for agreed sales remain well above pre-pandemic levels but new instructions to sell have decreased noticeably, and total stock held by estate agents has risen to its highest level since before the EU referendum in 2016.
“The stamp duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.
“How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.
“That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.”
Lucy Pendleton, from independent estate agents James Pendleton, added: “This is as muted a response to the faded hopes of a stamp duty tax break that sellers could hope to see.
“We were being led to believe we’d have to put our heads in our hands in January and brace for impact because of the end of the stamp duty relief but the market’s mechanics pointed to a different result all along.
“Rents have fallen, putting negative pressure on prices and first-time buyers won’t pay stamp duty on purchases up to £300,000 once the scheme ends anyway, just as they did before. For almost everyone else, apart from those at the top of the chain, the lost relief can be clawed back by renegotiating if necessary.
“It is sellers, not buyers, who are a little quieter at the moment. A lot of people with children have decided against listing their property for sale while they’re homeschooling and their home looks like a bomb has hit it. There are still plenty of first-time buyers looking and we’re just five weeks away from when people’s gardens start to look better and we always see a rush of activity after spring has sprung,
“The fact the Chancellor hasn’t ruled an extension to the stamp duty holiday either in or out is helping to create another wait-and-see period for both vendors and buyers. However, properties are still getting a very high level of engagement online. This is always good news and will manifest itself when we have a bit more clarity after the Budget. People are still dreaming of moving to larger properties, and one home we listed recently at nearly £4m received 8,000 views in 14 days. Most of these buyers would not be able to stretch that far but it tells us that the appetite is still there and will be reflected in activity over the summer.
“The bellwether London market has peaked for now and the shift in behaviour of landlords last month is evidence of that. Many landlords decided they would cash in on record prices late last year but were asking too much for homes that weren’t in great condition. Since mid-January, a significant number of them have now given up trying to sell and, having got tenants out, are now trying to let them again. Their gamble hasn’t paid off and this is weighing on supply even further.”