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New year dip for house prices

House prices went down by 0.3 per cent last month, Nationwide’s latest house price survey suggests.

This has translated into a slowing of the annual rate of house price growth from 7.3 per cent in December to 6.4 per cent in January, said Nationwide.

‘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’, said . Nationwide’s chief economist Robert Gardner

‘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, said Gardner. ‘This is because many peoples’ 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.

‘Indeed, the total number of mortgages approved for house purchases in 2020 actually exceeded the number approved in 2019, and house price growth ended 2020 at a six-year high, even though the economy was probably around 10 per cent smaller than at the start of 2020, with the unemployment rate around a percentage point higher.

Changed housing preferences are likely to continue to provide some support for the market in coming months. But ‘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’, said