House prices are finally coming down; here's what's behind the drop
11-20-2020
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The latest Rightmove house price index is finally showing a reduction in UK property prices, with sellers aiming for a safe sale ahead of the stamp duty holiday ending
Anna Cottrell
UK property buyers will welcome the signs that the recent house price surge is beginning to subside. The most recent Rightmove house price index is showing a monthly decline in house prices of 0.5 per cent; this isn't huge, and the annual house price growth is still high at 6.3 per cent, even the small monthly decrease is significant.
According to the data, the housing market is still booming, with 650,000 house transactions currently going through the property market, a 67-per-cent increase on the same time last year. Demand for housing has not subsided – far from it – but there are signs that new sellers have taken industry advice on board and are pricing their properties sensibly. This is a good tactic both for ensuring that the house sells and that it sells quickly, which will be especially important to sellers who are themselves moving onto a new property and want to take advantage of the stamp duty relief. Tim Bannister, Rightmove’s Director of Property Data comments:
'Given the ongoing mini-boom, prices might have been expected to rise again this month, but instead we have a slight dip which could be a result of some new sellers pricing more realistically to have a better chance of agreeing a sale in time to benefit from the stamp duty savings on their onward purchase.
'We know from a recent Rightmove study that sellers are twice as likely to sell if they agree a sale based on the first price at which their property goes on the market, something that’s even more important now as we move towards the end of March and the end of the stamp duty holiday. If your initial asking price is too high then you’re less likely to get an offer even after you’ve cut your price back to a more realistic level.'
This pragmatic approach to pricing will no doubt delight buyers – although there's still the problem of what both Rightmove and leading estate agents are calling a 'monumental backlog' of house sales as people rush to complete before the 31 March deadline for stamp duty relief. As Bannister puts it, 'millions of people are on tenterhooks until their sale or purchase has completed.'
Many of the buyers who have (re-)entered the property market in recent months are after properties in higher price bands, with the biggest growth in transactions recorded in the £400,000-£500,000 prices range – sales for homes in this price category have more than doubled, and no wonder, since buyers in this category have the most savings to make while the stamp duty holiday is in place.
The biggest question all buyers will be asking themselves is: should they bank on stamp duty relief, and should they proceed with a house purchase without the certainty of completing on time? Our advice, as ever, is to base your decision mainly on your personal circumstances. If paying stamp duty would make the home you're considering buying unaffordable, does it make sense to look within a slightly lower price band? Conversely, are you sure you're putting in an offer because it's definitely the home you want, not just because you'll save money on it? Especially if you're looking for a family home for the longer term, it's not a decision to make in a rush.