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Rush to use stamp duty holiday boosts prices

Wednesday, 4 April 2012 9:33 AM

House prices rose 2.2 per cent in March as first-time buyers rushed to beat the end of the stamp duty holiday, according to the Halifax.

The bank's house price index figure for the month contrasts with a 0.4 per cent fall in February. However, prices are little changed on three months ago (-0.1 per cent) and on a year ago (-0.6 per cent). That is the smallest fall in the annual rate seen since October 2010.

The volatility in the monthly figures reflects the fact that transactions remain at very low levels. However, the latest data from HM Revenue and Customs shows that there were 81,000 house sales in both January and February, 14 per cent higher than a year ago.

The stamp duty holiday allowed first-time buyers an exemption from one per cent tax on homes priced between £125,000 and £250,000 until March 24. That meant an extra four in ten buyers did not have to pay stamp duty.

The Halifax said the proportion of purchasers who were first-time buyers increased between the final quarter of 2011 and the first quarter of 2012.

The average UK house price is now £163,803, about the same as in July 2011. That represented 4.41 times earnings, an increase from 4.33 in February.

Martin Ellis, housing economist at the Halifax, said: "Efforts by first-time buyers to beat the expiry of the stamp duty holiday at the end of March have probably increased sales in recent months and may have helped to support prices.

"We continue to expect little overall movement in prices this year provided that the UK economy does not suffer a pronounced weakening."

David Newnes, director of LSL Property Services, said that the figures are a reminder of how much cash purchases are supporting the market.

He continued: "Halifax’s numbers remind us the economic conditions in the UK are still challenging for mortgage lenders and borrowers are being pushed to find large deposits before they can make a purchase. But they don’t show the strength of the market for cash buyers looking to snap up well-valued property. In areas where fewer buyers have to rely on mortgage finance, prices are looking healthier than these numbers suggest”.

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