Halifax’s latest house price index for month reports that the UK market has started to cool, with a month on month drop in house price values of 0.8%. This is the first snapshot of the UK property market by Halifax since new changes to stamp duty tax were introduced at the start of April, with an additional 3% charge on existing tax bands for all second home and buy to let purchases.
This drop, along with the decrease in February has offset the 2.2% increase felt in March due to the spike in demand to complete before April. However, month on month analysis can be a volatile way to view market activity due to external influences such as the change to stamp duty change and, it’s not all bad news for homeowners, as property values are still up on the last quarter and this time last year.
With Halifax also recording the lowest level of confidence in the market over the last year, it’s expected this downward trend could be set to continue. Although June’s EU referendum may continue to see this uncertainty increase, we’re currently heading into what is traditionally the busiest time of the year for the property market.
With supply levels 20% lower than this time last year and mortgage approvals 15% higher than in March, the current easy availability of credit with interest rates at a record low, will continue to artificially fuel a buoyant market and see things pick up over the course of the summer months.
The drop-off in property demand as a result of April’s stamp duty deadline has clearly contributed to the slow in the UK market, with house prices down 0.8% during April. The rush to complete during March saw prices on the increase, but along with the drop felt previously in February, the reported fall in April has offset this increase. Quarterly prices are still up 1.5% and have also increased year on year, so good news for home-owners in that respect.
However, confidence in the market is at its lowest level in a year and the general consensus is this may continue and prices will ease, particularly on the lead up to the EU referendum. I personally don’t think that will be the case. Supply and balance of housing in the UK market remain dangerously out of kilter and along with continuously low-interest rates, the market should continue to move upward, albeit slowly and aided artificially by the ease of securing a mortgage in this financial climate. We’re also entering into what is historically the busiest period of the year in terms of property sales, so this increased activity should also help bolster the UK market.Russell Quirk