Property sales rally as tax break ends

THE property market has been boosted by the strongest monthly rise in house prices in almost two years, according to a new UK study by Nationwide.

The average house price of £162,712 in February was 0.6 per cent higher than the previous month – the biggest rise since a 1.3 per cent leap in April 2010 – and 0.9 per cent higher than the same time last year.

Nationwide warned the increase could be at least partly due to a two-year concession on stamp duty for first-time buyers, which ends on 24 March.

However, Scottish experts say there are reasons to believe the rise is more than just a flash in the pan.

David Marshall, analyst at the Edinburgh Solicitors’ Property Centre (ESPC), said: “It’s much the same story here as down south. We’ve seen more house sales over the last two to three months than during the same period last year. Sales are 15 to 20 per cent up.”

At present first-time buyers of properties worth less than £250,000 are exempt from stamp duty. After 24 March, a 1 per cent charge will apply to those between £125,000 and £250,000.

However, there are signs to suggest it is not the stamp duty holiday that is fuelling the rise.

Mr Marshall said: “Over the past few months the sales of properties between the £125,000 and £250,000 barrier, which will be affected, have gone up by 16 per cent, while overall sales have gone up by 20 per cent.

“The thing to remember is we are still some way below peak market levels, but there has been an improvement in the number of houses selling.”

Bank of England figures have added to the optimism by showing mortgage approvals have reached a 25-month high.

Robert Gardner, chief economist for Nationwide, said: “Evidence that house prices picked up a little in February follows data releases suggesting economic conditions may not be quite as weak as feared after the economy contracted in the final quarter of 2011.

“Surveys of manufacturing and service sectors point to a rebound in January, while consumer confidence and retail spending were both stronger than expected during the month.”

February’s house price rise reverses a 0.3 per cent monthly house-price drop recorded by Nationwide in January and is the first month-on-month increase since last November. Mr Gardner said: “It remains to be seen whether this trend will be sustained. This increase in activity may be the result of a temporary rise in first-time buyers entering the market to take advantage of the stamp-duty holiday before it expires in March. If so, this may continue to support activity and prices in the near-term before cooling over summer.”

The Council of Mortgage Lenders (CML) doubted the wisdom of reintroducing the 1 per cent stamp duty rate. It said: “We are likely to see an unhelpful bunching of activity prior to expiry, followed by a dip.”