House prices ‘face 5pc contraction’

HOUSE prices will fall by up to 5pc next year following a post-lockdown boom that pushed values to record highs, Halifax has warned.

The property market will be hit by a toxic mix of rising unemployment and the end of the stamp duty holiday in March, the l ender said, knocking between 2pc and 5pc off the value of homes.

It follows booming activity this year, when a frenzied rush to move after restrictions were eased sent annual

price growth surging. The average price rose by 7.6pc to £253,000 in the year to November, according to Halifax, with growth on its strongest run since 2004.

Russell Galley, of Halifax, said: “While the economy should begin to recover in 2021, helped by the rollout of Covid vaccines, the jobs market will inevitably adjust to the changes in demand that are occurring and unemployment is expected to rise. With the stamp duty holiday also due to expire in March – and lower levels of demand – housing market activity is likely to slow.

“Taking all of this into account, the post-summer surge in house prices is unlikely to be sustained.”

Activity at the higher end of the price scale is driving the market as wealthy homeowners with small mortgages upsize after lockdown.

Meanwhile, first-time buyers and second-steppers with little equity have found it very difficult to borrow cash.

This polarisation was most pronounced in the West Midlands, where house prices rose 5pc while flat prices increased by 0.4pc, according to separate data from property website Zoopla.