House prices FELL in April as stamp duty rise causes market lull

House prices fell in April as the rise in stamp duty dampened the property market, according to Nationwide Building Society.

Prices fell by 0.6 per cent in the month of April, the data showed, after taking account of seasonal effects. 

In cash terms, the average home fell in value from £271,316 to £270,752.

It means annual house price growth slowed to 3.4 per cent in the 12 months to April, down from 3.9 per cent in the year to March. 

Robert Gardner, chief economist at Nationwide attributes the fall to the stamp duty changes at the start of the month.

He said: ‘The softening in house price growth was to be expected, given the changes to stamp duty at the start of the month.

‘Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.

‘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.’

Up until 1 April this year, first-time buyers paid stamp duty if a home cost more than £425,000. However, this has now dropped to £300,000 meaning costs have risen for many.

For example, instead of paying no stamp duty on a purchase worth £425,000, they are now paying £6,205.

More homes on the market

Aside from the stamp duty impact, there has also been a glut of homes on the market which can contribute to falling prices.

In the four weeks to 20 April there were 12 per cent more homes for sale, than a year previously, according to Zoopla.

The average estate agent branch had 34 homes for sale, compared to 31 at the same time last year and a low of 15 in 2022 during the pandemic boom.

Jonathan Hopper, chief executive of buying agent, Garrington Property Finders says this is creating a perfect environment for buyers.

‘In some parts of the UK, the supply of homes for sale is now far outstripping demand,’ said Hopper. 

‘This is especially true in more expensive, and often highly desirable, areas where the trickle of supply has turned into a flood.

‘In these areas, buyers find themselves blessed with both abundant choice and considerable negotiating power – and this is keeping prices flat or even nudging them down.’

However, while sellers are listing their homes, many buyers appear to be dithering rather than haggling, according to Matt Thompson, head of sales at Chestertons estate agents.

‘House hunters who entered the market in April were in less of a rush with some even pausing their search amid the Easter holidays,’ said Thompson.

‘Sellers, on the other hand, remained motivated and we have seen a clear uplift in homeowners listing their property for sale in April year on year.’

 

What will happen to house prices next? 

Some within the property industry think the market will pick up modestly, after turbulence caused by US trade tariffs put downwards pressure on interest rates. 

Mortgage rates have been falling with the Bank of England now expected to cut interest rates three or four times this year, rather than just twice.

This week has already seen a number of major lenders cut mortgage rates. On Monday, HSBC launched more than a dozen fixed rate deals below 4 per cent. 

Yesterday, NatWest cut mortgage rates with deals as low as 3.88 per cent for homebuyers, and today Barclays also announced a wave of cuts.

Hopper added: ‘Looking ahead, the prospect of interest rate cuts over the coming months will make mortgages more affordable and give buyers a little more leeway in their budgets.

‘This should help average house prices inch upwards, but the abundance of supply will ensure that the pace of price rises remains modest.’

However, Tom Bill, head of UK residential research at Knight Frank said things could quickly turn the other way. 

‘The risk is that inflationary pressures creep back into the system for reasons that include recent employer tax changes, which could mean the Bank of England slows the pace of rate cuts,’ said Bill.

‘Together with renewed speculation ahead of the Autumn Budget, it could curb buyer numbers after the summer.’