We suspect most of the recent weakness in housing demand and prices is due to the temporary influence of the rise in stamp duty on 1st April rather than any longer-lasting influence from the softer outlook for the UK economy. This supports our view that a gradual recovery in housing transactions to more normal levels will allow house prices in the year to Q4 to rise by an above-consensus 4.0% on average over 2025-27. Prices could rise faster if mortgage lenders continue to loosen their affordability criteria.
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