The annual pace of house price growth slowed in April following the increase in stamp duty at the beginning of the month, new figures show.
According to the latest Nationwide House Price Index, annual house price growth slowed to 4.9% in April, down from 5.7% in March.
This was despite property prices rising 0.2% during the month to £202,436.
Robert Gardner, Nationwide’s chief economist, said: “It may be that the surge in house purchase activity resulting from the increase in stamp duty on second homes from 1 April provided a temporary boost to prices in March.
“However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead.”
The 3% stamp duty increase, which came into effect on 1 April, is part of the government’s attempt to curb the buy-to-let market and free up property for first-time buyers. The basic rate of tax relief landlords can claim on properties is also set to fall to 20% from April 2017.
Following the surge in housing market activity ahead of the introduction of stamp duty, Nationwide said it expects the number of properties being sold in the coming months to fall.
There were 165,400 transactions in March, an all-time high, some 11% higher than the previous peak of 49,000 recorded in January 2007.
Cash purchasers accounted for around 35% of all transactions, compared to around 25% before the financial crisis.
Alex Gosling, CEO of HouseSimple.com, said: “April’s increase in the stamp duty on second homes fired demand substantially in March. With the deadline past, price rises in April are returning to more normal levels. And as uncertainty over the EU referendum continues, we may see this lull in the market continue.
“It’s an interesting time for the property market as we don’t really know where it’s going to go. What we do know is supply levels are stagnant. Whilst this goes in the favour of sellers, if we’re to see more first time buyers come into the market, more homes need to be built.”
