U.K. House Prices Decline for First Time in Seven Months

(Bloomberg) -- U.K. house prices fell last month for the first time since June as a temporary cut in the tax on purchases approached its expiration date.

Values fell 0.3% from a month earlier to an average of 229,748 pounds ($314,000), Nationwide Building Society said Tuesday. They climbed 6.4% from a year earlier, slowing from 7.3% in December.

Housing defied the economic malaise of the pandemic last year, booming amid pent up demand after the spring lockdown closed the market and after the government suspended the levy known as stamp duty.

Analysts are now divided on predictions for 2021, with the outlook clouded by an expected rise in unemployment and the end of the tax break. Property website Rightmove anticipates asking prices will climb 4%, while Halifax says they could slump as much as 5%.

“If the stamp duty holiday ends as scheduled and labor market conditions continue to weaken as most analysts expect, housing market activity is likely to slow, perhaps sharply, in the coming months,” said Nationwide’s Chief Economist Robert Gardner.

The government is coming under pressure to lengthen the tax suspension, with a petition calling for a six-month extension having garnered 140,000 signatures. During a debate on Monday a succession of lawmakers backed the move, saying it would help their constituents in the process of moving, keep the housing market buoyant and aid the economy.

In response, Financial Secretary to the Treasury Jesse Norman said the government is aware of the strength of feeling on the issue but said he was unable to comment on tax policy before March’s budget. Still, he pointed out the holiday had been successful partly due to its time-limited nature.

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