House prices have have gone crazy recently as buyers rush to take advantage of the stamp duty discount, which runs until the end of March 2021. However, it appears the house price boom may be about to come to a grinding halt with new data showing a predicted fall in prices in January and February.

The housing market in England and Wales is on course for a New Year correction, according to one of the earliest snapshots of the short-term housing market outlook, the Reallymoving House Price Index, which is based on analysis of 30,000 conveyancing quote forms completed at the beginning of the purchase process.

If Reallymoving’s data becomes a reality, average prices will peak in December reaching a new predicted high of £352,239, before falling in January by 1.2 per cent and falling by a further 2.5 per cent in February

However, the statistics aren’t all doom and gloom, although down month on month, the figures for the predicted downturn in January and February are still some 18.4 per cent and 16 per cent up respectively on last year’s figures (see the table below).

Actual and predicted figures via Reallymoving

Reallymoving’s forecasts have historically closely tracked the Land Registry’s Price Paid data. Rob Houghton, CEO of reallymoving, commented: “Our prediction of a New Year change in fortunes for the housing market has been further strengthened by the latest data which clearly shows price growth entering a downward trend in January and accelerating in February.”

Interestingly, the price rises haven’t been driven by all types of buyers. Between July and December 2020, the proportion of First Time Buyers (FTB) in the market actually fell by 12 per cent compared to the same period last year meaning the post-lockdown boom has been driven by homeowners higher up the ladder who benefited the most from the stamp duty land tax (SDLT) holiday. Comparatively few FTB have benefited from the tax savings as they already enjoyed SDLT relief on the first £300,000 of property purchases below £500,000 prior to the discount being introduced. Furthermore, they have faced additional challenges securing mortgages during the pandemic as many loans were withdrawn and they have had to compete with BTL investors for starter homes. This competitive market has pushed up average prices in the second half of 2020.

“The mask is beginning to slip on the two-tier housing market of recent months, which has seen activity from equity-rich homeowners who are less affected by the pandemic, concealing problems at the lower end of the market where First Time Buyers have benefited little from the stamp duty holiday and faced considerable challenges securing higher loan to value mortgages,” Houghton continued.

“Despite positive vaccine news, which will certainly boost confidence that the end of the pandemic is now in sight, there are significant challenges for the housing market to overcome in the short term, including the end of both the stamp duty holiday and the furlough scheme on 31st March, which is likely to result in further downward movement in prices over the first half of next year,” he predicted.