UK house prices pick up 6.9% on the year in surprise February rebound

Average price reaches £231,068 despite expectations of a slowdown in line with the end of the stamp duty holiday

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British house prices picked up unexpectedly in February with surprise annual growth of 6.9 per cent, compared to 6.4 per cent in January, according to lender Nationwide.

The average house price reached £231,068 ($320,920) last month, despite expectations of a slowdown in the housing market as finance minister Rishi Sunak prepares new budget measures to boost the property market.

In February alone, house prices rose 0.7 per cent reversing a 0.2 per cent decline in January.

“This increase is a surprise. It seemed more likely that annual price growth would soften further ahead of the end of the stamp duty holiday, which prompted many people considering a house move to bring forward their purchase,” said Robert Gardner, Nationwide's chief economist.

“While the stamp duty holiday is not due to expire until the end of March, activity and price growth would be expected to weaken well before that, given that the purchase process typically takes several months."

Britain's mortgage approvals remained "robust" in January, another signal of a strong market, with UK lenders approving 98,994 home loans in January, according to the Bank of England, down about 4,000 from 102,809 seen in December.

Mr Sunak unveiled a stamp duty land tax (SDLT) break in July to bolster the property market during the Covid-19 crisis, with the first £500,000 of the purchase price of a main residence in England and Northern Ireland exempt from the tax.

Mr Sunak is expected to extend the tax perk until the end of June at Wednesday's budget, and also unveil a mortgage guarantee scheme that encourages lenders to provide mortgages to first-time buyers with deposits as low as 5 per cent on properties worth up to £600,000.

Housing demand soared in the second half of last year as buyers reassessed their housing needs because of a series of lockdowns and Mr Sunak’s tax break.

Nationwide said the outlook for the market was particularly uncertain now, with the potential for it to be boosted further by Mr Sunak on Wednesday.

“There is scope for shifting housing preferences to continue to boost activity, especially if there is further policy support in the budget, said Mr Gardner.

“Nevertheless, if labour market conditions weaken as most analysts expect, it is likely that the housing market will slow in the months ahead.”

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