Richard Sexton, director of e.surv comments:
“The sharp fall in transactions in April shows the huge impetus the end of the stamp duty holiday injected into the market. The 32% rise we saw in March has now been replaced by the corresponding fall and the pressure is now on for the government to show schemes like New Buy will be able to make up for the return of stamp duty and drive the market forward.
“Property prices have shown remarkable stability over the last 12 months. Even though the UK entered recession in the first quarter, prices have increased by 0.4% since December and by 1.4% since June. On an annual basis, we’re likely to see price growth return next month as the spike in prices created by the rush to beat last year’s stamp duty hike for properties over £1m falls out of the figures.
"The market has been supported by strong underlying demand from buyers, who, despite having to clear relatively large hurdles to access mortgage finance, are still anxious to take a step onto the property ladder. Strong underlying demand from buyers pushed transactions in Q1 2012 20% higher than in the same period last year.
“The East Midlands joined London as the only other region to see a monthly increase in prices in April. A large volume of prime property in London is changing hands at very high prices and this is bumping up prices across the capital. This is in marked contrast to the North of England, where prices have fallen 4% on the year as public sector cuts and static economic growth have caused disproportionate economic strain on the region.
"Nonetheless, the North saw prices rise 1.1% in April, which is likely to have been driven by the stamp duty rush. This means the increase is unlikely to be sustained in the short-term, but it shows even where prices have fallen, there remains a strong appetite for property across the country.”
Dr Peter Williams, housing market specialist and Chairman of Acadametrics, comments:
"Last month, the main feature of the housing market was the increase in transactions arising from first time buyers who bought properties in advance of the 24th March 2012 ending of the Stamp Duty Land Tax holiday.
"We calculate that this increased March sales by an additional 4,500 properties over and above normal sales for the time of year. Unsurprisingly, this month the opposite is true, with April sales down by an estimated 11,000 from March, where, in a normal year, they would be the same.
"Whilst some of the ‘lost’ April sales were those first-time buyer purchases, pulled forward by a month or more to benefit from the SDLT concession, sales volumes are still lower than one might expect, even after taking into account this effect.
"Other factors that came into play in this period were the announcement by some of the larger lenders that they would increase their standard variable rates and reduce lending, and the fact that both unemployment and inflation rose, all of which are likely to have had a negative impact on sales. We will get a better feel for what is happening over the next few months."
House prices
"Despite the activity generated by first time buyers in March, price changes have been relatively modest, with the +0.1% increase in the average house price in March followed by a −0.2% decrease in April. In part, this is because on average the price paid for a home in England & Wales still lies within the £125,000-£250,000 tax holiday SDLT banding available to first time buyers. Hence, an increase or decrease in activity within this band will not have significantly altered the average price paid overall.
"There has been relatively little movement in nominal house prices over the last nine months, especially when compared to the change in prices that took place over the previous five years. That said, in real terms, prices have, of course, been falling.
"Prices rising during 2007, reaching a peak in February 2008, followed by a fall during the ‘credit crunch’ years to a trough in April 2009, after which prices recovered during 2009/2010, reaching their most recent peak in March 2011. This was the last month in which properties costing £1 million or more could be bought at an SDLT rate of 4%.
"Following the increase in SDLT rates on these higher priced properties to 5% on 6th April 2011, the number of £1 million plus homes sold has decreased by 15%, resulting in a decline in average house prices to the current level at around £220,000. The first time that average house prices reached the £220,000 level was in April 2007. Hence, nominal prices are now back to where they were exactly five years ago, although RPI has increased by 18% over this same period.
"The annual change in average house prices is currently standing at −0.7%. This is the twelfth month in succession in which the annual rate has been negative on the LSL Acadametrics index. However, once the April 2011 figure, boosted by the rush to buy £1 million plus homes, drops out of the annual statistics next month, we anticipate that the annual rate of change in house prices will switch to positive territory.
"Whilst there is now a new rate of SDLT of 7% for properties valued at over £2 million, these make up less than 1% of the market and it is far from clear whether it will have a big impact upon the market given other tax changes that might benefit wealthier buyers."
