The average price of property coming to market was more muted in February as home sellers appear to be adjusting their expectations due to looming stamp duty changes.
The latest Rightmove House Price Index shows asking prices rose by just 0.5% on a monthly basis in the first weeks of February, below the typical 0.8% for this time of year.
It comes as stamp duty thresholds are set to drop in April and sellers are becoming more realistic on house prices as anyone starting the buying process now will likely face higher property taxes.
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Data from the property website shows the average UK asking price as of mid-February was £367,994.
The figure is still up by £1,805 and by 1.4% annually.
The price of a typical first-time buyer home fell 0.1% on a monthly basis to £226,887, while second stepper and top of the ladder properties were up by 0.5% and 0.6% respectively.
The latest release follows January’s record rise in asking prices, when growth was at a five-year high.
Colleen Babcock, property expert at Rightmove, said: “New sellers are showing some pricing restraint after a fast start to the year, being mindful of both the high level of seller competition, and in England also of the looming stamp duty deadline and extra costs for some buyers.
“Agents report that some of the steam is coming out of new sellers’ price expectations to fit the changing market conditions, which is a sensible reaction to attract buyer interest, and it will also help to support activity levels.”
The stamp duty rush
The property market had a busy start to the year as buyers rushed to put offers in and start the conveyancing process with the aim of completing before stamp duty thresholds drop in April.
Currently, first-time buyers benefit from zero stamp duty on the first £425,000 of a purchase while home movers get relief on the first £250,000.
This will drop to £300,000 and £125,000 from April, adding thousands to the cost of buying a property.
It is no surprise the number of available homes for sale is at a 10-year high, moderating the New Year price surge, Rightmove said.
The number of new sellers coming to market is up 13% annually, while buyer demand is 8% ahead, and sales agreed numbers are up by 15%.
But the property website’s analysis showed there are more than 550,000 homes sold yet awaiting legal completion, 25% more than at this time last year and many may miss the deadline.
First-time buyer purchases between £500,001 and £625,000 are most affected, with an extra £11,250 at risk for this group if the deadline is missed, Rightmove said.
Babcock adds: “The upcoming stamp duty deadline in England remains a key talking point, and while some movers may not be affected at all, others will be more severely impacted. We’ve previously suggested reforms such as regional variations in stamp duty charges to try and address some of the inequities in the current system.
“With the predicted conveyancing log-jam likely to cause some buyers to miss the deadline and end up paying more tax through no fault of their own, it would seem justifiable for the government to announce a short extension before the end of March.
“For those in higher-priced areas of England like London, the additional stamp duty charges they face can be significant and difficult to afford when already stretched to the max. The lengthy and frustrating completion process means that the average mover has had to have one eye on the clock since November to ensure that they complete before the stamp duty deadline.”
Will house prices rise in 2025?
House price forecasts currently range from 2% to 4% growth for this year.
But the data is currently skewed by the stamp duty rush as many transactions may have been brought forward to the first quarter to beat the stamp duty changes.
It is unclear how pricing could change from April when purchasing costs will be higher and buyers will also be dealing with higher taxes.
Rightmove is still predicting that asking prices will rise by 4% this year though.
Babcock adds: “Beyond the stamp duty deadline, agents report that underlying market activity remains positive, and that they don’t expect a major drop-off in activity from April, as the financial impact on many movers is smaller than previous deadlines.”
Toby Leek, president of estate agent trade body NAEA Propertymark, said: “Many buyers will have been placed firmly in the driving seat when it comes to their next house purchase due to the time constraints placed on those needing to sell and buy their next home to beat the upcoming stamp duty rises.
“What we expect to see now is a potential slowing in the pace of the housing market as well as the number of mortgages approved. Those who are unable to move home before the stamp duty increases will likely be eagerly awaiting future inflation and interest rate announcements in the hopes of further improving their affordability in the long term.”
