The unexpected rise in the Nationwide house price index in February adds to the growing pile of evidence that the stamp duty holiday is just one of several reasons behind the recent surge in sales and house prices. While we are wary of reading too much into one month’s data, this suggests that the fall in house prices we expect this year is now in the balance.
Surprise rise suggests market could shrug off end of stamp duty holiday
- The unexpected rise in the Nationwide house price index in February adds to the growing pile of evidence that the stamp duty holiday is just one of several reasons behind the recent surge in sales and house prices. While we are wary of reading too much into one month’s data, this suggests that the fall in house prices we expect this year is now in the balance.
- The +0.7% m/m rise in house prices in February was much stronger than anticipated (the consensus was minus 0.3% m/m) and more than reversed the 0.2% m/m decline in prices in January. (See Table 1.) As a result, annual house price inflation picked back up, from 6.4% to 6.9%, leaving it only just shy of the peak of 7.3% recorded in January. (See Chart 1.)
- The rise marks a contrast to the recent slowdown in asking prices. So it will be interesting to see what Halifax observed in February when their data is released on Friday.
- That said, there have been positive signs in other leading indicators. Google search data and enquiries to estate agents through Rightmove point to resilient buyer demand in February. (See here.)
- Nationwide’s index is based on house prices at the mortgage approvals stage and, by February, these sales would have been unlikely to exchange in time to benefit from the stamp duty holiday. Of course, the holiday is now likely to be extended, but this wasn’t obvious a month ago. So it appears that high household saving and a change in housing preferences are also important drivers of the recent strength of the market.
- The likely extension of the stamp duty holiday and a new Help to Buy mortgage guarantee scheme in the Budget tomorrow would further reduce the downside risks to house prices this year. So while we still expect the housing market to hit a difficult patch when the furlough scheme ends, a fall in house prices in 2021 looks increasingly unlikely.
Chart 1: Nationwide House Price Index
Sources: Nationwide, Rightmove
Nationwide House Prices – Key figures
House prices (£000s)
Andrew Wishart, Property Economist, +44 (0)7427 682 411, email@example.com