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UK house price growth slows in October ahead of stamp duty change which will ‘dampen demand’ says Nationwide
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UK house price growth slowed down in October ahead of big stamp duty change, according to Nationwide.
The building society said that the stamp duty changes outlined in the Budget will "dampen demand".
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Nationwide said the average price of a property increased by just 0.1% last month - down from a growth of 0.7% in September.
The annual growth rate was 2.4% last month, easing back from a two-year high of 3.2% in September, the building society said.
The average UK house price in October was £265,738, down slightly from £266,094 in September.
The news comes after in the Autumn Statement this week, Ms Reeves revealed that second-home buyers will face a stamp duty rate rise of two percentage points – from 3% to 5%.
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The Treasury confirmed stamp duty thresholds will also fall next spring.
From April 2025, a first-time buyer purchasing a property valued at £425,000 will incur a stamp duty charge of £6,250.
Stamp duty is one of the additional upfront costs that purchasers may incur when buying a property.
Currently, first-time buyers are exempt from paying stamp duty on properties priced up to £425,000.
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If a property is more expensive, they only pay tax at 5% on the portion above £425,000 and up to £625,000.
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.
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"Providing the economy continues to recover steadily, as we expect, 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."
Nationwide said "solid" labour market conditions, with low levels of unemployment and wage growth, had helped drive a steady rise in market activity and valuations this year.
The building society said the Chancellor's decision to let the price at which buyers start paying stamp duty fall back to pre-2022 levels in the Budget would affect the timing of deals.
Mr Gardner said: "Buyers would "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."
However, the swings in activity are likely to be "less pronounced" this time, because the planned changes had been known about in advance.
Nathan Emerson, chief executive of Propertymark, said: "As the wider economy has become more settled, it’s encouraging to witness greater affordability and confidence flow through the housing market.
"With strong hints we may see a steady reduction in base rates implemented over the coming months, there is substantial scope to round the year with an upbeat tone to be carried forward into 2025."
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
You pay the tax when you:
- Buy a freehold property
- Buy a new or existing leasehold
- Buy a property through a shared ownership scheme
- Land is transferred to you or property in exchange for payment, for example, you take on a mortgage or buy a share in a house
The rate you pay depends on the price and type of property and certain thresholds.
If you are a first-time buyer no stamp duty is due if the property is worth £425,000 or less.
You'll also get a discount if the purchase price is £625,000 or less and will only pay 5% SDLT on the portion from £425,001 to £625,000.
Those who aren't first-time buyers will pay different rates depending on the value of their new home:
- If it's up to £250,000 - no stamp duty is paid
- For the next £675,000 (the portion from £250,001 to £925,000) - stamp duty is charged at 5%
- For the next £575,000 (the portion from £925,001 to £1.5million) - stamp duty is charged at 10%
- For the remaining amount (the portion above £1.5million) - stamp duty is charged at 12%
For example, if you are buying a home worth £300,000 you would pay stamp duty at a 5% rate on the £50,000 - £2,500.
You'll usually have to pay 5% on top of SDLT rates if buying a new residential property means you’ll own more than one.
What's the picture across the UK?
According to Nationwide, data for the year to June 2024 suggests that the stamp duty change will affect around one in five first-time buyers.
But the Building Society said that the impact will "vary significantly"; across the country.
This is largely a result of the difference in house prices across the UK.
Mr Gardner said: “The largest effects are likely to be in the South East of England, where 40% of first-time buyers paid between £300,000 and £425,000 for their homes, where the change will increase the cost of moving for the affected first-time buyers by £2,900 on average.
"The areas least affected are Yorkshire & The Humber, the North of England and Northern Ireland, where less than 10% of first-time buyers paid between £325k and £425k for their homes."
He added that the additional tax paid by affected first-time buyers in these regions will, on average, be lower than in London and the South East.
Meanwhile, a stamp duty calculator has revealed how the Budget affects first-time and second-home buyers.
What has been happening with house prices?
The housing market has been pretty stagnant throughout the first half of this year, but there are signs that growth is picking up.
In August, Nationwide found the average house price stood at £265,375.
On a monthly basis house prices actually fell by 0.2% in August, with around £959 wiped off the value of a home compared to July.
However, this tends to happen during the warmer months as factors such as the summer holidays tend to slow down action in the market.
Karen Noye, mortgage expert at Quilter previously said: "A dip in activity is usually to be expected in the summer months, but this year it appears to be minimal, and we are instead seeing signs of an ongoing recovery in the housing market."
Who else tracks house prices?
Halifax is part of Lloyds Group, which is the UK's biggest mortgage lender.
Its monthly house price index is based on the mortgage data it holds and has been going since 1983.
It's one of several key barometers of the property market.
The official measure of house prices is from the Office for National Statistics, which uses data from the Land Registry where the actual sold price is recorded.
This is the most accurate of all the indices, but the figures come out three months after the homes are sold, so there's a big time lag.
Halifax and Nationwide each publish a monthly index tracking the average prices of homes on which they provide mortgages.
While they do adjust their figures to iron out big outliers, both lenders measure average house prices based on the properties they see.
As it's based on mortgage approvals, cash buyers are not included.
Rightmove and Zoopla also publish monthly house price data.
The former is based on asking prices from the property listings on its website.
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The latter uses sold prices, mortgage valuations and data on agreed sales.
Neither takes into account the price a property actually sold for like the ONS Land Registry, which could end up being higher or lower and some might not even sell at all.
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