Annual house price growth slows for first time in six months

House prices were up by 6.4% annually in January, marking a slower increase than the 7.3% uplift recorded in December, Nationwide Building Society said.

Property values dipped by 0.3% month on month.

Across the UK, the average house price was £229,748.

A temporary stamp duty holiday which was introduced last July is due to end on March 31.

Robert Gardner, Nationwide’s chief economist, said: “January saw the annual rate of house price growth slow modestly to 6.4%, from 7.3% in December.

“House prices fell by 0.3% month on month, after taking account of seasonal effects – the first monthly decline since June.

“To a large extent, the slowdown probably reflects a tapering of demand ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase.

“While the stamp duty holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months.

“The typical relationship between the housing market and broader economic trends has broken down over the past nine months.

“This is because many people’s housing needs have changed as a direct result of the pandemic, with many opting to move to less densely populated locations or property types, despite the sharp economic slowdown and the uncertain outlook.”

He continued: “Looking ahead, shifts in housing preferences are likely to continue to provide some support for the market.

“However, if the stamp duty holiday ends as scheduled, and labour market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The first month-to-month fall in Nationwide’s index since June adds to evidence that house prices are topping out.”

He added: “Looking ahead, we continue to expect house prices to drop by about 2% over the course of 2021, provided that Government polices do not change.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The runaway housing market is starting to show the first indications of taking a foot off the gas…

“The next few months will be interesting. As we head towards the deadline for taking advantage of the stamp duty holiday, lenders are navigating a fine line between the need for volume and market share versus risk appetite and service.

“There is a certain amount of chopping and changing on rates and products as lenders deal with unprecedented circumstances. However, with interest rates unlikely to rise anytime soon, mortgage rates should remain competitive.”

Anna Clare Harper, chief executive of asset manager SPI Capital, said: “Looking forward, it’s likely that house price growth will continue to slow, given economic conditions and the end to the temporary stamp duty reduction.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics) said: “Those likely to miss out on the stamp duty saving due to backlogs tell us they would prefer to compromise on price rather than miss out on the property they have set their hearts on.”

Lucy Pendleton, from estate agents James Pendleton, said: “Expect low interest rates and vaccine optimism to continue to play a commanding role in what happens over the next few months, as all eyes turn to unemployment and the end of the furlough scheme.”