The latest Halifax House Price Index has revealed some telling statistics about the state of the housing market.
The headline – “House price growth on strongest run since 2004” – indicates a positive boom for sellers.
The price of an average house in the UK is now £253,243 – an increase of 1.2% compared to the previous month and a whopping 7.6% increase compared to the same time last year.
Compared to an inflation rate of 0.9%, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), it’s gone up leaps and bounds.
A combination of pent up demand, low interest rates, unexpected savings pots and of course the stamp duty freeze has created a perfect storm, triggering this surge in house prices.
But therein lies the rub – while the stamp duty freeze has been a salient excuse to buy right now, the price inflation is already wiping out any savings on some properties.
Russell Galley, Halifax’s managing director, points out: “House prices rose by more than 1% in November, adding almost £3,000 to the cost of a typical UK home. At just over £253,000, the average property price has risen by more than £15,000 since June.”
He adds: “It is interesting to note that the stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.”
And once the stamp duty freeze is over? It’s not hard to predict that a crash might be on the way.
What it means for you…
This inflation is of course great news for sellers and prices are probably going to be as good as it gets for the next couple of years – provided the sale can successfully go through before the stamp duty freeze ends, of course.
Otherwise there may well be a flurry of buyers pulling out of the sale at the last minute when they realise they can’t actually afford the purchase with the stamp duty.
Buyers should be even more cautious and ask whether it’s a good deal.
And now is an especially important time to work out the numbers – the stamp duty freeze is due to end in March, with no confirmation that it would be extended, and the backlog in the system means sales may not complete in time to take advantage of the savings.
So, if the property you’re buying remains a good deal without the stamp duty saving, by all means proceed with caution. This is particularly important if you’re in a chain and rely on other sales to go ahead.
If the numbers only add up when you have the savings from the stamp duty freeze, you may want to think twice, negotiate harder or wait until next year when house prices are likely to fall. Or if you still want to go ahead, make sure you have enough funds to cover stamp duty in case your sale doesn’t go through in time.