How is coronavirus affecting house prices?
The UK property market is enjoying a boom right now, with house prices rising by 10% every year.
This increase continues to be fueled by a temporary cut to stamp duty, however with the tax break now tapering off, the rate of price growth could be set to slow.
Here, Which? explains what’s happening to house prices and provides advice on making a deal on a property during these uncertain times.
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What’s happening towards the property market?
The property market is open and active through the UK, with estate agents conducting in-person house viewings and buyers able to move home.
Since last July, the united kingdom property market continues to be increasing, led by the government temporarily cutting stamp duty.
The biggest savings of up to lb15,000 ended on 30 June, but buyers in England and Northern Ireland can continue to save up to lb2,500 if they purchase a home prior to the end of September.
Transaction numbers soar as buyers chase tax cuts
The quantity of houses for sale rose significantly throughout the tax holiday.
Provisional data from HM Revenue and Customs (HMRC) shows that 198,240 sales experienced in June, as buyers battled to secure properties prior to the 30 June deadline.
The smaller spike in March reflects the original stamp duty deadline, before it was extended to June.
The graph below shows the amount of sales registered each month because the oncoming of 2021.
How have house prices changed?
We’re obtaining a clearer picture of the impact coronavirus has had on house prices, however the stamp duty holiday and continued uncertainty over what will happen next with the pandemic means figures could continue to fluctuate.
The most dependable barometer of house prices may be the Land Registry’s UK House Price Index, which is based on sold property prices. It works on the two-month lag, so the latest available figures are for May.
The Land Registry says the average cost of a property in the UK rose by 10% year-on-year in May to reach lb254,624, as shown within the graph below.
Rightmove’s house price index is much more up-to-date, but it’s according to prices rather than sold prices. In July’s report, it found average prices had risen by 0.7% month-on-month and 5.7% year-on-year.
Nationwide’s index (based on mortgage lending) reported a 0.5% monthly drop and 10.5% annual increase in prices in July. Halifax’s index (also based on lending) reported a 0.4% monthly rise and seven.6% annual increase.
What may happen in the remainder of 2021?
There’s been a lot of optimism around the property market recently, with buyers competing over homes within the most sought-after areas.
Research by Rightmove found the typical time to agree sales in June was 38 days, the cheapest figure registered since the start of the pandemic.
This figure continues to be strongly affected by the stamp duty holiday, and we could see sales take more time once the tax break and the government’s financial support schemes ended.
Lack of supply will keep prices high
The recent increase in demand from buyers hasn’t been met with a flurry of new properties coming on towards the market, and this imbalance can keep prices high in the approaching months, despite smaller tax savings available.
Mark Hayward of the estate agency group Propertymark says: ‘The market is experiencing an increasing imbalance of supply and demand, and we see no indication that supply levels increases. We firmly stay in a powerful seller’s market that will impact house prices as buyers bid to secure their dream home.
‘In order to stop numerous viewings for any property while restrictions continue to be in place, agents have been able to revert towards the traditional practice of creating a hot-list of able clients who can move quickly.’
How does the stamp duty holiday work?
In England and Northern Ireland, the temporary tax-free threshold of lb500,000 ended on 30 June.
Between now and 30 September, the threshold is lb250,000, before returning to lb125,000 for home movers from October.
The Welsh stamp duty holiday ended on 30 June, and Scotland’s tax break ended on 31 March.
How do house viewings work on the minute?
During last year’s lockdown, estate agents began offering video house viewings, which are continuing to experience a component despite the recent lifting of restrictions.
The government’s latest guidance recommends that buyers should first view properties virtually whenever we can.
If after this you a home personally, you may find the estate agent requests you wear a mask and sanitise your hands when entering the home.
Is it possible to obtain a good mortgage deal?
Since the pandemic began, the number of mortgage deals available on the market has fallen dramatically, but nowadays there are plenty of good rates available – particularly if you have a bigger deposit.
Data from Moneyfacts implies that average minute rates are falling, with some banks now offering mortgages with rates below 1%.
Buyers with deposits of 5% and 10% happen to be hardest hit by deals being withdrawn, though first-time buyers have been handed a lift by the new 95% mortgage guarantee scheme, which launched in April.
Buyers locking in low mortgage rates
David Hollingworth of L&C mortgages says: ‘Mortgage rates remain competitive, and will also help boost borrower affordability and confidence. Availability for those with smaller deposits has been improving, with lenders going back to the 90% and 95% mortgage markets.
'With demand still high as we start to see restrictions ease, there's little to suggest that house prices will face a success soon.
‘Overall, home buyers have been showing that they remain confident enough to maneuver throughout a pandemic and take advantage of low mortgage rates.
‘Borrowers can deal with their rate in order to protect against any potential future fluctuation, and many have taken the chance to achieve this.’
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This story was originally published in March 2021. It's regularly updated with the latest figures from various leading house price indices. The final update was on 6 August 2021.
