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UK house prices expected to fall as lockdown, stamp duty deadline and job cuts weigh

·Finance and policy reporter
·3-min read
The UK property market is cooling. Photo: Dinendra Haria/SOPA/Sipa USA
The UK property market is cooling. Photo: Dinendra Haria/SOPA/Sipa USA

Much of the UK property industry expects house prices to fall in the next three months, as lockdown, home-schooling and the end of a stamp duty holiday cool the market.

One leading economic analyst also predicted prices will be 2% lower in a year’s time, knocked by a deteriorating jobs market, tougher mortgage rules and higher rates, and would-be buyers spending on other things as lockdown restrictions ease.

Recent mortgage lending and property website data suggests prices began to fall month-to-month in January, in what could mark the beginning of the end of the market boom since the middle of last year.

Lenders Nationwide and Halifax both said earlier this month average prices slid 0.3% between December and January. The decline on properties with Halifax mortgages marked the greatest drop since last April. Meanwhile listings site Rightmove (RMV.L) saw a 0.9% dip in asking prices.

A new poll by the Royal Institute of Chartered Surveyors (RICS) on Thursday shows a majority of its member surveyors and estate agents expect prices to fall in the next three months.

WATCH: How much money do I need to buy a house?

READ MORE: UK house price growth slows for first time in six months

A net balance of -15 respondents in January predicted lower prices, after a -12 reading in December marked the first time a majority expected falling prices since June.

The -15 reading also marks the most widespread expectations of price declines since last May in the middle of the first nationwide lockdown, which severely constrained the market.

The property market has been allowed to continue to function during the latest national lockdown since the start of January, but industry figures say virus fears and restrictions are still limiting activity.

“The latest RICS survey suggests that despite attempts to keep the housing market open through the latest lockdown, there has been perhaps an inevitable impact on the level of activity in the sector with both enquiries from potential buyers and new instructions slipping back,” said Simon Rubinsohn, chief economist at RICS.

Ian Morton, of Bradburne & Co chartered surveyors in St Andrews, said would-be sellers were holding back on advertising their properties.

Buyer numbers have also been affected. “Purchasers are window shopping during their exercise hour or online with virtual viewings but hesitant to view in person as expected,” he said.

Some highlighted home-schooling as a drag on market activity amid school closures.

READ MORE: Rightmove sees busiest ever month but more sales fall through as stamp duty deadline looms

Many estate agents and surveyors said they expected the looming end to temporary stamp duty and land tax holidays across the UK to hit sales in months to come. Several said they expected current sales to be renegotiated but not fall through if they miss the deadline and buyers face higher tax bills.

A net balance of -29 predict sales will be lower over the next 12 months, though the number expecting higher prices in a year’s time increased to +30.

Several other property industry figures struck a less bullish tone, however.

Tom Bill, head of UK Residential Research at Knight Frank, predicted prices would be flat in the year ahead, as demand “becomes steadier and more seasonal” in the second half of 2021.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, predicted prices would slide around 2% in 2021.

“Demand to move to a bigger home likely will subside as Covid-19 is brought under control and people start to spend more of their disposable incomes on services again, leaving less money left over for housing,” he said.

He added: “Higher mortgage rates, meanwhile, are largely here to stay, given the outlook for a further deterioration in the labour market this year. Forced sales also likely will rise this year, as mortgage payment holidays expire and lender forbearance lessens.”

WATCH: What do stamp duty cuts mean for buyers and house prices?

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