What effect has the COVID-19 coronavirus had on the UK house prices?

Written by Pymm & Co

What has the global COVID-19 pandemic meant for the home buyer, the home seller and the home owner?

So, 2020 has been rather an unusual one for the entire planet Earth with the COVID-19 coronavirus pandemic having effected everyones lives in one form or another. However the UK property market has witnessed a somewhat mini boom since we emerged from the first national lockdown back in June. On 8 July 2020, the Chancellor of the Exchequer, Rishi Sunak announced a temporary stamp duty holiday that cut the rate of stamp duty to zero per cent for all properties £500,000 or under until 31 March 2021. But there are doubts as to whether the UK house prices will continue to rise once the stamp duty comes to an end next April.

What is happening to the UK property market?

All Estate Agents in England, Northern Ireland, Scotland and Wales are allowed to be open and conducting live viewings at the desired properties as apposed to the virtual viewings of the first national lockdown. The house buyers and sellers are allowed to move despite the current Tier 4 restrictions that are in place across most the of the UK.

Since the emergence from the first national lockdown, the UK housing market has continued to rise which has been largely fuelled by announcement from the Government of the stamp duty holiday. This temporary stamp duty holiday has meant that house buyers could save up to £15k in tax as long as the move is completed before April 2021 when the stamp duty holiday is due to end.

As well as the temporary stamp duty holiday, other reasons for the mini boom is people wishing to move to a bigger house with a garden and people moving from London and major built up areas to get more property for their money in more rural areas. With many of us now working from home and looking like this may be the new future, having to be located in a major city is no longer an issue.

We have provisional data supplied by the HMRC showing that 105,630 property sales exchanged and completed in October which is the highest number recorded in a single month since 2016.

How have property prices changed since the pandemic started?

House prices will probably continue to fluctuate in the coming months as we begin to come to terms with dealing with life under COVID-19 rules. With continuing Tiers and lockdown announcements but the hope that the vaccine will guide us to an exit of this nightmare, it is difficult to nail down what will happen to the UK housing market.

The Land Registry’s UK House Price Index which sold properties are based on and operates a two-month lag has said that property in UK had increased by 0.7% month-on-month, and a 5.4% year-on-year increase in October to reach an average house price of £245,443.

Rightmove’s index for December’s report which is more up to date and also based on a property asking price than actual sold price, found the average asking property price has dropped by 0.6% month-on-month but has risen by 6.6% year-on-year.

Based on mortgage lending, the Nationwide’s index reported a 0.8% annual rise in property prices in October, while the Halifax which is also based on lending, reported a 1.2% monthly and a 7.6% annual increase in November.

2021 property market predictions

Rightmove’s recent comment that the average time to agree a sale on a property fell to just 49 days in November 2020 has been met with some optimism.

With the Government’s coronavirus financial support schemes and the temporary stamp duty holiday due to come to an end in 2021, it is fair to say that the experts are split on whether the housing market and house price growth will come to a slow down.

Halifax says the housing market will eventually feel the effects of the economic downturn, with ‘greater downward pressure on house prices in the medium-term’.

Nationwide says the winding down of government support schemes could ‘dampen housing activity’.

Rightmove predicts asking prices will rise by 4% in 2021, but says the pace of increases will be lower than those seen this year.

Zoopla believes that growth may slow down in 2021, but says it doesn’t expect house prices to fall before the end of next year.

The Centre for Economics and Business Research (CEBR) predicts house prices could fall by 14% in 2021.

Has the temporary stamp duty holiday cut affected house prices?

With savings of £15k on a half a million pound pad, the buyers of property in the more expensive parts of the country are the biggest winners. The stamp duty but encouraging buyers to sell their city centre homes to move out to the country.

However the temporary stamp duty holiday coupled with the lifting of the first lockdown and demand for buyers to move has contributed to an increase in house prices, especially on properties that are in sought after areas of the country.

Buyers must also be aware though that buying a property for the asking price based on the stamp duty holiday could ultimately result in you paying a premium which could see the value of the house fall over the next 12 months.

Is it too late now to take advantage of the stamp duty holiday>

In a nut shell, yes! Inevitably the stamp duty holiday itself has put a huge demand on house surveyancing and conveyancers which has meant the whole process has slowed right down. Therefore with 3 months left until the stamp duty holiday expires it is unlikely that from putting in an offer on a house to completion date, you will be able to take advantage of the deal. But maybe they will extend it, we will find out soon!

How are house viewings working at the moment?

During the first full national lockdown, Estate Agents along with everyone else were closed fully, meaning that we provided virtual viewings on the properties we listed. As we don’t know yet what will happen with a third national lockdown looming, we will continue to offer virtual viewings on our properties.

With the Governments latest guidelines and that we are currently in Tier 4, we are allowed to stay open and conduct live in-person house viewings, but it is recommended that viewers filter our their choices to only seeing properties that they think they are likely to put in an offer on.

At Pymm & Co Estate Agents we are following strict social distancing measures on all our property viewings and asking viewers to touch the least amount of surfaces as possible and remember that this is still someones home.

Can I still get a good mortgage deal?

Since the COVID-19 pandemic began and the UK went into lockdown, the number of mortgage deals offered have halved, mainly due to the fear of redundancies and wage cuts. But there are plenty of good rates still out there to be had especially if you have a bigger deposit.

The property buyers with only a 5% or 10% deposit have been hit the hardest by lenders withdrawing their offers, resulting in many properties falling through and coming back on the market, so it is always advisable to keep tracking a property if you missed out first time round!

If you would like help or advice on the best mortgage deals on offer at the moment then get in touch with our sister company Broadland Consultants.