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UK's red hot property market pauses for breath as prices dip

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·4-min read
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Row of new built houses in england uk.
The largest annual house price growth in the year to April 2021 was recorded in Wales. Photo: Getty Images

UK property prices fell by 1.9% in April compared to March, with the average house falling by around £5,000 ($7,058), the HM Land Registry's latest house price index revealed.

The average house price is now £250,772, still up £20,000 in a year.

Average house prices increased by 8.9% in the year to April 2021, down from 9.9% in March 2021. And between March and April 2021 transactions decreased by 35.7%.

"The slight loss of momentum in the housing market in April reflects the fact that house prices had been inflated in March as buyers rushed to purchase a property before the original end date of the temporary increase in stamp duty to £500K," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

The policy has been extended in England until June, when the threshold will be reduced to £250K. Toms expects prices to rebound from April’s drop in the near term. 

Watch: How much money do I need to buy a house?

He added that the latest data suggests house prices increased again in May.

"Nonetheless, we expect house prices to give back some of their recent gains towards the end of this year, as the threshold for stamp duty reverts to £125K at the end of September and households’ real disposable income comes under pressure from higher consumer price index inflation and the removal of the furlough scheme."

He said that in Scotland, where, unlike in the rest of the UK, the threshold for stamp duty returned to its pre-COVID level at the end of March, prices fell by 4.1% month-on-month in April, providing a glimpse of the impending hit in England in October.

Meanwhile Nick Barnes, head of research at estate agent Chestertons, said: “April’s property market was boosted by March’s £35.6bn in mortgage lending; a record-setting level of mortgage activity that will have a snowball effect over the next few months. As a result, we will continue to see strong demand from property buyers in an already competitive market.”

The largest annual house price growth in the year to April 2021 was recorded in Wales, where prices increased by 15.6%.

Read more: UK business secretary declares 'year of optimism' despite reopening delay

The index also showed house price growth was strongest in the North East, where prices increased by 16.9% in the year to April 2021. The lowest annual growth was in London, where prices increased by 3.3% in the year to April 2021.

House prices in London are still the highest in the UK, but they dropped from an average of £500,000 in March to an average of £492,000 in April, and the annual price rise is just 3.3%.

Ged McPartlin, managing director of Ascend Properties, said: “Despite a cooling in the monthly rate of house price growth the northern property powerhouse continues to steam ahead, registering some extremely impressive gains on an annual basis."

"This should continue for the remainder of the year, albeit at a less ferocious rate once a stamp duty saving is no longer on the cards, as buyers continue to take advantage of low mortgage rates and the newly available 95% mortgage.”

“London has been slowly simmering in comparison to the rest of the UK market having been hit hardest by pandemic uncertainty and a reduction in foreign homebuyer demand, in particular," said Marc von Grundherr, director of Benham and Reeves.

But he added: "The tide is slowly starting to turn and while there’s a very real chance that the wider UK market will come off the boil by the end of the year, London will continue to bubble.”

It was earlier reported that the coronavirus pandemic has halted home ownership plans for prospective first-time British buyers.

Nearly one third (30%) of prospective first-time buyers delayed their plans to purchase a property because of COVID-19, but 70% of hopeful buyers are confident they will purchase a home within the next 10 years.

Watch: Am I wasting my money by renting?

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