House prices drop an ‘eye-catcher’ due to stamp duty changes
UK house prices fell in April at their fastest month-to-month rate in nearly two years, fresh data has suggested, as adjustments to stamp duty knocked demand.
Prices declined by 0.6 per cent in April compared to the previous month, according to Nationwide.
The drop was attributed to stamp duty changes, introduced by Chancellor Rachel Reeves last autumn, coming into effect at the beginning of this month.
Nationwide’s chief economist Robert Gardner said the slowdown in house price growth was “to be expected” as buyers rushed to buy homes in March in order to avoid paying extra taxes.
“The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays,” Gardner said.
“Activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.
The year-on-year change in house prices was 3.4 per cent, lower than the figure of 3.9 per cent seen in March.
The average house price was now £270,752 as a result of the drop, the building society added.
Pantheon Macroeconomics’ Elliott Jordan-Doak described the fall in April as an “eye-catcher” but added that the slowdown was likely to be short-lived.
“History shows us that home buyers race to beat property tax changes, with activity taking a temporary hit when the policy change comes into effect,” he said.
The changes mean that house buyers now pay taxes on properties of over £125,000, which is half the previous threshold.
First-time buyers will also now have to pay stamp duty on homes costing more than £300,000.
The lowest rate of stamp duty tax is two per cent and rises to 12 per cent for portions paid above £1.5m.
The last monthly decline came in August last year.
The latest house prices data may alert members of the Monetary Policy Committee (MPC) at the Bank of England, who will make an interest rates decision next week.
Policymakers may be concerned about the impact of President Trump’s trade war with China on UK growth.
Higher taxes on capital gains and employers, which also kicked into effect in April, are also dampening consumer confidence.