Housing market swings will be ‘less pronounced’ than after previous stamp duty changes, says Nationwide

Swings in purchasing activity in the housing market will not be as significant as after previous changes to stamp duty, Nationwide’s chief economist has predicted.

In the Budget on Wednesday, the chancellor confirmed that she would allow the temporary increase in the nil rate stamp duty thresholds to expire on 31 March 2025.

This will mean that, from that date, for first time buyers purchasing a property of under £500,000, the nil rate band threshold will fall to £300,000 from £425,000.

For other residential buyers, the nil rate band threshold will decline to £125,000, from £250,000.

Robert Gardner, Nationwide’s chief economist, said the main impact would likely be on the timing of property transactions, with purchaseers rushing to complete before the tax change takes effect.

“This will lead to a jump in transactions in the first three months of 2025 (especially March), and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes,” he said.

However, he added that “the swings in activity are likely to be somewhat less pronounced, in this instance, given that the stamp duty reduction has been in place for some time and its planned expiry was well known”. 

Gardner said it would be difficult to determine the underlying strength of the market “until this period of volatility passes”.

He made the comments as Nationwide published its monthly house price index, which revealed that the price of a typical UK home increased by 2.4% year on year in October.

This represented a modest slowdown from the 3.2% pace recorded the previous month. 

House prices rose by 0.1% month-on-month in October.

“Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the significantly higher interest rate environment,” said Gardner.

“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year. 

“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”