House prices held firm before the Budget as the market “paused for breath” to see what the Government had up its sleeve, figures show.
The price of a typical UK home increased by 2.4 per cent in October, compared to the year before, according to Nationwide’s house price index. This represented a modest slowdown from the 3.2 per cent pace recorded in September.
The average house now costs £265,738 in October, a 0.1 per cent month on month rise.
Robert Gardner, Nationwide’s chief economist, said: “Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the significantly higher interest rate environment.
“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year.”
Providing the economy continues to recover steadily, as the building society expects, housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth, he said.
In Wednesday’s Budget, the Chancellor confirmed that the temporary increase in the nil rate stamp duty thresholds would expire on 31 March next year and revert back to their previous levels.
From that point, for first time buyers purchasing a property of under £500,000, the nil rate band threshold will fall to £300,000 from £425,000 at present.
For other residential buyers, the nil rate band threshold will decline to £125,000 from £250,000.
Speaking about the stamp duty changes, Mr Gardner said: “The main impact of the stamp duty changes is likely to be on the timing of property transactions, as purchasers aim to ensure their house purchases complete before the tax change takes effect.
“This will lead to a jump in transactions in the first three months of 2025, especially March, and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes.”
Marc von Grundherr, director of Benham and Reeves, said a slower rate of house price growth is always expected during the month of a Budget as the housing market “pauses for breath to see what the Government has up its sleeve”.
He added: “But the market still recorded positive growth on both a monthly and annual basis which demonstrates just how far we’ve come so far this year.”
However, other experts are more cautious about a market recovery.
Tom Bill, head of UK residential research at Knight Frank, said: “We expect this year’s house price recovery to come under pressure following the increase in borrowing costs triggered by the Budget.
“How much depends on the reaction of bond markets in coming days and the Bank of England’s rate decision and comments next week. It appears a ‘mini-Budget’ moment has so far been avoided.”
Rachel Reeves announced that the stamp duty on purchases on second homes and buy-to-let properties is to increase from three to five per cent as of yesterday (31 October).
Homebuyers in the most expensive areas of England and Northern Ireland – in particular London and the South East – will be most impacted by increases to thresholds due to high average property prices.
Richard Donnell, head of research at Zoopla, said: “In parts of London with home values over £600,000, first-time buyers could pay an additional £15,000 in stamp duty.
“Buyers will want to take this off the price they pay for homes, keeping price rises in check.”