The UK housing market showed signs of slowing in February, with a noticeable dip in demand, especially among first-time buyers, as the countdown to changes in stamp duty thresholds began. House prices rose by 2.9% on an annual basis in February, matching January’s growth rate, which marks the lowest increase seen in six months. However, the result fell short of analysts’ expectations of a 3.1% rise.
In contrast to the yearly growth, house prices dropped by 0.1% on a monthly basis, a sharp reversal from January’s 0.6% increase. The average house price decreased slightly from £298,815 in January to £298,602 in February. This reflects a cooling in the market, despite the persistent annual increase.
Regional variations in the market were noticeable. Scotland recorded a strong annual house price increase of 3.8%, up from 2.5% in January, marking the fastest rise in over a year. The average price of a property in Scotland reached £213,014 in February. Similarly, Northern Ireland maintained its position at the top for annual house price growth, with a 5.9% increase, the same as January. The average property price in Northern Ireland stood at £205,784.
In Wales, property prices rose by 2.8% year-on-year, with an average house costing £226,811. In England, the biggest annual increase came from Humberside and Yorkshire, where house prices climbed 4.1%, with the average property priced at £216,130. Meanwhile, London’s growth slowed to 1.6%, down from 2.6% in January. Despite the deceleration, London remains the most expensive place to buy property, with an average price of £545,183.
As the 1 April deadline for the upcoming stamp duty changes draws near, demand for housing has waned. The government’s planned changes to the stamp duty threshold—reducing it from £250,000 to £125,000—will affect all property buyers, with first-time buyers seeing a decrease in their exemption threshold from £425,000 to £300,000. This shift could lead to higher costs for prospective buyers and contribute to the ongoing cost-of-living crisis.
Amanda Bryden, head of mortgages at Halifax, noted that the market is experiencing a delicate balance. She explained that while many buyers rushed to secure mortgages before the stamp duty changes, demand has started to subside as the deadline approaches. This has led to a slowdown in the growth of first-time buyer prices, which rose by only 2.4%, compared to a 3.7% increase in prices for homemovers.
Despite the slowdown, Bryden highlighted that market activity remains resilient, with figures comparable to pre-pandemic levels, indicating strong demand from buyers even amid higher borrowing costs.
The latest data provides some reassurance for housebuilders, with Russ Mould, investment director at AJ Bell, stating that while the market has stalled, it has not collapsed. He suggested that the underlying supply and demand dynamics continue to support property prices, even as the stamp duty holiday comes to an end.
