House Price Growth Hits 6 Year High

Category: House Prices

Author: Ahroob Jabbar

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House Price Growth Hits 6 Year High

The year of 2020 ended strong as the UK annual house price growth rose to a six-year high of 7.3%, as reported by Nationwide. This is the highest growth level since 2015, driven by the increasing levels of property demand. House prices continue to inflate across the UK with the region of East Midlands performing the strongest. Prices of properties soared across the board, with detached, terraced, semis and flats all indicating a robust growth. The boom in the market is a result of several factors:

Buyers Changing Preferences

As the population adapts to working from home, many have re-evaluated their home environments. From the requirements of home-offices spaces to larger areas, or even re-locating closer to places of work. This is largely due to limiting time on public transport, minimising the risk of catching the virus. We now face the third lockdown of the pandemic. For many, this marks 9 months of working and studying from home. Therefore, we predict buyers will continue to embark on the trend of assessing their current space. Thus, driving demand and boosting prices.

Stamp Duty Holiday

The Stamp Duty Holiday provides significant savings of up to £15,000 for buyers. The scheme was announced in July 2020 and has brought forward many people’s plans of moving home. The Stamp Duty Holiday ends on the 31st March and many buyers are rushing to complete their sales.

Government Support

The Government continues to provide furlough and Self Employment Income Support, this has assisted many. In conjunction with this, evidence shows declining consumer spending. As a result, buyers were able to save more money to pay off any outstanding debts and save towards a new home.

Mortgage and Payment Holidays

Payment holidays were offered by lenders to those impacted by the pandemic. The ban on home repossessions and a break in paying rents enabled many to stay in their homes. The property repossession ban will continue until 31 January 2021, as proposed by The Financial Conduct Authority. Consequently, due to the chronic housing shortage, demand for properties remains high. Resulting in inflating property prices.

Low Mortgage Interest Rates

The month of November welcomed an extraordinary rise in mortgage approvals. With figures reaching as high as 104,000 – the highest since the Global Financial Crisis in 2007. This relatively high number is due to low interest rates. Two interest rate cuts in a single week have reduced the base rate down to a record low of 0.1%. An interest rate close to zero, will benefit many first-time buyers and re-mortgagors.

House Prices Grow Across Regions

*Graph and table results from Nationwide House Price Index Dec 2020

According to Nationwide, in December, figures rose from 6.5% to 7.3%. The average price for a property in the UK now sits at £230,920. A 4% increase is predicted for the UK mainstream market, but with the robust growth of the market, 2020 will most likely exceed this figure. Annual house prices have risen in Q4 across all regions, compared to Q3. The South East region recorded a significant increase of 8% in 2020. This includes cities such as Brighton, Southampton, and Oxford. Average house prices in London grew by 6.3% reaching a record level of £486,562. Rates in the North West and Yorkshire & Humberside grew to 8% and 7.7% respectively.

The Upward Trend in the Market Continues

Buyer enquiries have continued to increase over the course of the past five months. In July, reports revealed an incredible increase of 75% in new enquiries. This was due to the ripple effect of the lockdown, with many seeking to move home. Despite the lockdown, the number of enquiries made in November increased by 27%. Although, this figure has fallen to a steady pace since the 43% rise in October, according to RICS Survey.

The number of listings landing on the market also continues to increase. The sum of sales agreed in November were considerably higher than reported in 2019, rising by 35%. This is primarily due to the record-breaking number of mortgage approvals granted in a single month. Loan borrowing surpassed the figure of 104,000 in November. We predict the number of sales agreed and completed transactions will continue to increase rapidly to meet the stamp duty deadline in March.

Property investment has proven to be the most stable form of investment across the sectors – if you would like to discuss your next investment please get in touch.

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