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House prices: end to stamp duty holiday has 'dampening effect'

House prices fell 1% in March, which Nationwide said was predictable given the imminent expiry of stamp duty relief for first-time buyers.

House prices: end to stamp duty holiday has 'dampening effect'

House prices fell 1% in March and are down 0.9% on last year, according to new figures from Nationwide.

Prices are also down 0.1% over the three months to March.

Wales reported the largest quarterly decline, with prices down 3.1%. At 0.6%, the North boasted the biggest quarterly increase, followed by Scotland with a rise of 0.5%.

On an annual basis London prices have seen the biggest increase – up 2.3% – while Northern Ireland has experienced the largest decrease, with prices down 8.3%.

The price of a typical UK house is now £163, 327.

Robert Gardner, Nationwide’s chief economist, claimed the slowdown in prices was to be expected given the imminent expiry of the stamp duty holiday for first time buyers, which had provided a temporary boost to house prices in early 2012 as buyers brought forward purchases that would otherwise have taken place later in the year.

The tax relief which previously saw first time buyers escape paying the 1% stamp duty on properties worth under £250,000, ended on 24 March after the chancellor failed to extend the deadline in last week’s Budget.

‘This dampening effect on housing market activity and prices may fade over the course of the summer, especially if the wider economy outlook begins to improve and other policy measures, such as the government’s NewBuy scheme, are successful in supporting buyer demand,’ Gardener added.

However, he warned that the introduction of a 7% stamp duty threshold on properties purchased over £2 million is also likely to have a ‘dampening’ effect on activity – though this should be modest given how few transactions involve such properties.

In 2010 there were 4,000 such transactions, accounting for just 0.5% of total residential property transactions in the UK, Nationwide said.

Over the next twelve months Gardner said he expects house prices to move sideways or modestly lower.

In contrast, figures from Rightmove earlier this month showed that house prices rose 1.6% in March and are up 4.9% since the start of the year – the largest first-quarter increase since 2004, according to the property website.

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