House prices dropped in January

House prices fell back by 0.5% in January according to the first official figures covering the month.

The data from the Office for National Statistics corroborates figures previously released from mortgage lenders covering the month, which indicated a small drop in prices ahead of the expected end of the stamp duty holiday in March.

However, assorted market data has since indicated prices stabilising or picking up again in February and March – and the stamp duty holiday has since been extended.

Yesterday’s official figures showed that the drop in prices between December and January took the average price for a house back under the £250,000 mark it had reached at the end of last year. The official average price was £249,300.

However, the ONS said that, after seasonal adjustment, prices were effectively unchanged between December and January.

The drop also did little to reduce the steep annual rise in house price inflation, with prices up 7.5% year-on-year for the month, compared with 8% in December.

Nationwide and the Halifax both reported price falls of 0.3% in their monthly indices in January, with the latter also reporting a fall in February. However, Nationwide reported prices rising in February, and online estate agents Rightmove and Zoopla have both since reported price rises.

Estate agents have suggested that rising prices are being driven by continued demand hitting a lack of supply, as many home sellers have decided not to market their properties during lockdown.

Demand has more recently intensified, according to Zoopla, following the chancellor’s announcement of the stamp duty holiday extension on 3 March. Rishi Sunak also announced the introduction of a mortgage guarantee scheme from next month.

Despite the month-on-month fall, Paul Stockwell, chief commercial officer of Gatehouse Bank, said: “The housing market is off to a strong start this year with prices still being driven up annually, primarily by buyers seeking larger homes and outside space. The early signs are that demand is going to continue in the short term, making for a busy spring and summer.”