"We would not expect the level of growth seen in house prices over the past year to be sustained throughout 2021."
The data also shows that in the latest quarter (December to February) house prices were 0.5% higher than in the preceding three months.
Russell Galley, managing director of Halifax, said: “Having enjoyed an extremely strong period of activity in the second half of last year, the housing market continued its softer start to 2021, with average prices down very slightly (-0.1%) compared to January. However, with annual house price inflation currently at +5.2%, property values remain comfortably higher than 12 months ago, when February was the last full month before lockdown.
“The housing market has been at something of a crossroads at the start of this year, with upcoming events key to determining the path of activity and prices over the next few months. The government’s decision to extend the stamp duty holiday – one of the main drivers of demand from homemovers during the pandemic – has removed a great deal of uncertainty for buyers with transactions yet to complete.
“The new mortgage guarantee scheme is another welcome development from this week’s Budget. Whilst mortgage approvals have reached record highs in recent months, hitting levels not seen since before the financial crisis of 2008, raising a deposit continues to be the single biggest hurdle for first-time buyers to overcome.
“In the longer-term, the performance of the housing market remains inextricably linked to the health of the wider economy. The pace and extent of recovery are still highly uncertain, and much will depend on the ongoing success of the UK’s vaccination roll out.
“Though there is the likelihood of an economic ‘bounceback’ from lockdown, with households not unduly impacted by the pandemic deploying the significant reserves of savings that they have built-up, higher unemployment is likely to limit new buyer demand. Therefore, we would not expect the level of growth seen in house prices over the past year to be sustained throughout 2021.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: "The housing market softened slightly in February as it seemed too late for buyers to take advantage of the stamp duty holiday. But with the Chancellor announcing an extension to the concession in his Budget, more buyers are realising they could still reasonably expect to take advantage of the tax break, which will further help the market's momentum.
"The introduction of 95 per cent mortgages backed by the government from next month will also give first-time buyers and homemovers a boost. We have seen a flurry of enquiries from those who were planning to utilise the Help to Buy scheme who are now keen to buy older housing stock rather than new-build options. With the big lenders confirmed as offering the first 95 per cent products, we look forward to seeing terms and pricing sooner rather than later."
Lucy Pendleton, property expert at James Pendleton estate agents, added: “The ongoing stampede for larger homes left its boot print all over the performance of the market in February as it defied predictions of a severe slowdown.
“Now that the stamp duty holiday has been extended, there is nothing standing in the way of a string of new record highs over the coming months. While pumping up property prices is unlikely to have been the Chancellor’s aim, he has effectively fired the starting gun on what is set to be a second honeymoon for house price gains.
“Annual house price growth has now been above 5% for seven consecutive months. It will be fascinating to see how long the market can hold on to that growth, but of course such a hot market isn’t welcomed by first-time buyers who will be relying heavily on the government guarantee mortgages that are now going to be available to them.
“We’re not out of the pandemic woods yet. People are still living on top of each other and not everyone who decided they wanted to move would have been able to last year. Some may accuse the Chancellor of just kicking a correction down the road but predictions of weakness in this market later in the year could be overeager.
“Households are not going to forget the trauma of repeated lockdowns in snug-fitting properties any time soon and house prices could easily stay in positive territory year on year once the taper ends, particularly if a change in working patterns proves permanent.”
