U.K. House Prices Drop Unexpectedly in March, Nationwide Says

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U.K. house prices fell unexpectedly this month as buyers braced for the expiration of a temporary tax break on purchases.

Values dropped 0.2% from February to an average of 232,134 pounds ($319,000), Nationwide Building Society said Tuesday. They climbed 5.7% from a year ago. Economists had expected an 0.4% gain for the month.

Britain’s property market has boomed in recent months, shaking off the worst recession in three centuries. The government propped up demand by giving buyers a temporary tax break and extended that incentive in the Treasury’s annual budget on March 3.

U.K. House Prices Drop Unexpectedly in March, Nationwide Says

Prices fell in January, according to Land Registry data, but since then optimism about the outlook for the economy rebounded and industry surveys showed people restless to move after being told to stay home for months. London was the weakest performing region.

“The slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the chancellor announced the extension in the budget,” said Nationwide’s Chief Economist Robert Gardner.

While Gardner said activity is likely to remain buoyant over the next six months, the outlook beyond that isn’t so certain.

“It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market,” he said. “However, if the labor market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”

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