Rolling coverage of the latest economic and financial news
- Average UK house price fell 0.3% in January
- Annual house price growth slowed to 6.4%, from 7.3%
- Nationwide: Activity likely to slow in coming months
- Analyst: Stamp duty holiday extension unlikely
Howard Archer, chief economic advisor to the EY ITEM Club, predicts house prices will fall this year.
The market will come under ‘mounting pressure in the near term’, Archer says, as the Covid-19 lockdown weighs on the economy. There may well still be a “significant rise in unemployment”, he adds, despite the furlough scheme being extended until April.
“The EY ITEM Club expects the housing market to come under increasing pressure through much of 2021, although support in the first quarter will likely come from buyers looking to take final advantage of the Stamp Duty threshold increase before it ends on 31 March. There are reports that the Chancellor does not intend to extend the raising of the Stamp Duty threshold in the 3rd March Budget.
“The EY ITEM Club suspects that house prices could be around 5% lower than now by the end of 2021.”
James Sproule, chief economist of Handelsbanken in the UK, argues that Rishi Sunak is unlikely to extend the stamp duty holiday beyond 31 March.
“The question for many people is: will the Stamp Duty holiday be extended beyond 31 March? While such a situation is not impossible, we judge it unlikely. The housing market, as indicated by these numbers, is not showing signs of being in trouble and the Chancellor’s focus will need to remain on the parts of the economy that are facing difficulty.
There is also real pressure to balance the government’s accounts, including widespread talk of tax rises. To effectively raise taxes to provide a boost to the housing market is unlikely to be a strategy the Chancellor will want to follow.