U.K. House Prices Rise Unexpectedly Fueled by Stamp Duty Relief

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U.K. house prices rose unexpectedly in February, continuing a surge fueled by a temporary tax relief on purchases and Covid-induced shifts in people’s lifestyles.

Values increased 0.7% from January to an average of 231,068 pounds ($321,000), Nationwide Building Society said Tuesday. They climbed 6.9% from a year ago, accelerating from the 6.4% pace registered a month earlier.

U.K. House Prices Rise Unexpectedly Fueled by Stamp Duty Relief

Housing boomed last year with a rush to get more space and take advantage of a temporary relief on stamp duty, the tax charged on purchases. That helped the market shake off the worst economic recession in three centuries following restrictions imposed for Covid-19.

The tax holiday saves buyers as much as 15,000 pounds and is due to expire at the end of March. However, speculation has mounted in recent weeks that Chancellor Rishi Sunak will extend the relief in his budget on March 3. He is also set to introduce a mortgage guarantee program to help people get on the property ladder.

“This increase is a surprise,” said Nationwide’s Chief Economist Robert Gardner. “It may be that the stamp duty holiday is still providing some forward momentum, especially given the paucity of properties on the market at present. Shifts in housing preferences may also be providing a more significant boost to demand.”

He said the outlook for the markets was unusually uncertain, but that if the labor market weakens, it is likely to slow in the coming months. Even so, property website Rightmove recorded its busiest ever day on Feb. 17.

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