Buyer demand appears resilient to end of tax break

There are clear signs that the end of the stamp duty holiday is causing the housing market to slow. In January the RICS reported a sharp drop in new buyer enquiries and seller instructions, and house prices edged down for the first time since last summer. But there are tentative signs that buyer demand bounced back in February, even though prospective buyers have little chance of benefitting from the tax break. Google trends data show that searches for property portals are still substantially higher than before the pandemic. Rising unemployment will lead to some forced sales later in the year, and this will drag activity and house price inflation down. But with most high-income households enjoying healthy finances and the structural increase in remote working prompting them to re-evaluate their home, there is a risk that our forecast that house prices will dip by 4% this year is too pessimistic.