UK house prices have unexpectedly rebounded ahead of the planned end to the stamp duty holiday, industry data showed on Tuesday.
According to the latest Nationwide house price index, annual house price growth was 6.9% in February, compared to 6.4% in January. Most economists had been looking for growth of 5.5%.
On a seasonally-adjusted basis, prices rose 0.7% month-on-month, more than reversing January’s 0.2% decline. The average house price of £231,068 is the highest on record, Nationwide said.
Most analysts were expecting house prices to continue slowing as the end of the stamp duty holiday later this month neared.
Robert Gardner, Nationwide’s chief economist, said: “This increase is a surprise. It seemed more likely that annual price growth would soften further ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase.
“It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present. Shifts in housing preferences may also be providing a significant boost to demand, despite the uncertain economic outlook ahead.”
Gardner added that the outlook for the housing market remained “unusually uncertain”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The data are based on intended purchases for which Nationwide has made mortgage offers. While it is doubtful these transactions will complete before the end of this month, due to conveyancing and legal delays, the chancellor looks set to announce that any buyers that have already instructed a solicitor will still be able to take advantage of [the stamp duty holiday].”
Tombs added that Pantheon Macroeconomics’ forecast for a 2% decline in house prices over the year now looked “too downbeat”. The forecast will not be revisited until after Wednesday’s budget, however.
Howard Archer, chief economic advisor to the EY Item Club, said: “The EY Item Club has frequently expressed belief that the current elevated housing market activity and robust prices will prove unsustainable sooner rather than later.
“There are reports that the chancellor will extend the raising of the stamp duty threshold to the end of June. There have also been suggestions of a mortgage guarantee scheme, to help people with small deposits.
“[We] still believe that the housing market is likely to come under mounting pressure over the coming months. The recent marked strengthening in the housing market has been disproportionate given the economy’s contraction over 2020 and rising unemployment.”
The EY Item Club is predicting house prices will fall by around 3% over 2021, revised up from an expected decline of 5% given potential measures expected to be announced in the budget.