Nationwide: Is now a good time to purchase a home? UK house price growth slows following the stamp duty rush

The cost of stamp duty changes in April is being factored into the housing market

After a slowdown in house price growth was reported by the most recent Nationwide House Price Index, homebuyers seem to be adapting to higher property purchase costs.

According to Nationwide data, the annual growth rate of home prices slowed to 3 percent in April from 3 percent in March. The monthly growth rate also decreased by 0.6 percent.

The average price of a home in the UK is now 270,752.

It comes after the beginning of the year saw a surge in the real estate market as people rushed to close deals before stamp duty thresholds were lowered.

The cost of purchasing a property increased when stamp duty relief for home movers decreased from 250,000 to 125,000 and for first-time buyers from 425,000 to 300,000.

Seasonally adjusted, 177,370 property sales were reported to the taxman in March, according to HMRC estimates released today, an increase of 104% on an annual basis.

Many analysts are questioning whether the market is about to slow down as consumers adjust to higher stamp duty costs, though, as price growth now seems to have been slowing.

"A softer price for homes."

Since a market slowdown frequently follows stamp duty holidays, some people anticipated this decline in the growth of home prices.

Chief economist Robert Gardner of Nationwide stated: "Given the stamp duty adjustments at the beginning of the month, the slowing growth in home prices was to be expected. According to preliminary data, there was a notable increase in transactions in March, as purchasers postponed their purchases to avoid further tax liabilities.

"The market will probably continue to be a little soft in the upcoming months, as is customary after stamp duty holidays conclude.

Though the longer days tend to draw more viewings, the changes also occur during the normally busier spring and summer home selling season.

Another factor that might increase buyer demand is the possibility of additional interest rate cuts.

Despite broader economic uncertainties in the global economy, Gardner continued, "activity is likely to pick up steadily as summer progresses, as underlying conditions for potential home buyers in the UK remain supportive."

Household balance sheets are strong, unemployment is still low, earnings are growing at a healthy rate in real terms, and borrowing costs should slightly decrease if the bank rate is further lowered in the upcoming quarters, as we and the majority of analysts anticipate. Swap rates have, in fact, slowed down recently.

Would it be wise to purchase real estate now?

Buyer demand does seem to have already been impacted by higher stamp duty costs.

Demand increased by just 1% annually in April, according to the most recent Zoopla House Price Index, while supply increased by 12%.

It appears that affordability is still a problem, but if interest rates are lowered the following week, this might change.

The managing director of the nationwide estate agency group Fine and Country, Jonathan Handford, stated: "There is increasing conjecture that cuts may occur as early as May. Global headwinds, such as the possible disruption brought on by changes in international trade, are also influencing that outlook in addition to domestic inflation data. But it might also encourage UK policymakers to take more rapid action to promote growth and loosen lending restrictions.

Nevertheless, difficulties still exist. A sizable portion of prospective buyers are still unable to afford the high cost of housing in many upscale neighborhoods. Despite indications that the overall state of the financial system may improve, many people are still excluded from the market by stricter lending regulations and high deposit requirements.

"After a period of demand driven by deadlines, April's slowdown represents a natural rebalancing." However, if affordability obstacles are removed, the market may pick up steam later this year as inflation slows and rate cuts become more likely.

Mortgage rates are still high, which is made worse by the increased stamp duty expenses, according to Holly Tomlinson, financial planner at Quilter.

"The numbers indicate a fragile market," she said. A more substantial decline in mortgage rates or an increase in real incomes are probably prerequisites for any significant recovery in activity. In the meantime, it appears that the housing market will remain stagnant.

Zoopla predicts that as supply increases and demand slows, house price growth will further slow to 11 percent in the upcoming months.

There are others who are more hopeful. While Savills has projected a 4 percent growth by the end of the year, estate agency brand Knight Frank has projected a 2 to 5 percent increase.