Pandemic no barrier as house prices rise faster than at any time since 2014
December saw the biggest annual rise in house prices for over seven years, as buyers rushed into the market to be sure of completion before the end of the stamp duty holiday.
December 2020 saw the end of the second national lockdown and the beginning of the third. So it might seem odd that the housing market continued to break records. But that's exactly what happened: the average UK house price jumped 8.5% year-on-year, up from 7.1% in November, to a record high of £252,000, according to the latest data from the Office for National Statistics. That’s the highest annual growth rate the UK has seen since October 2014.
The rise could reflect several things we’ve touched on before: pent-up demand, changes in housing preferences as more and more people prioritised space and greenery over city living, and of course buyers taking advantage of the stamp duty tax holiday, where properties in England and Wales up to the value of £500,000 would incur no tax.
Though the Halifax house price index (which we discussed last week) shows demand is slowing as we come to the end of the stamp duty holiday, the market managed to end 2020 with far more growth than it had seen in years. An extension to the tax holiday hasn’t been ruled out, so if that were to be extended, prices could continue to rise into the first quarter of 2021.
A six-week extension to the stamp duty holiday could benefit between 120,000 and 160,000 additional property transactions, saving buyers a potential £1bn, says property website Rightmove. Right now, there are around 412,000 sales agreed at the end of last year that are still making their way through the conveyancing process.
“The delays we’ve seen in the home-moving process have been through no fault of the buyers and sellers who agreed a sale last year and who are now desperately trying to get their deals over the line,” says Tim Bannister from Rightmove. Any delays have come as a result of lockdowns, those involved in the process facing the intricacies of working from home, and just the sheer volume of transactions attempting to go through.
One in five buyers who agreed to a purchase last July have yet to complete over six months later, says Rightmove. And, despite it being too late for them to beat the stamp duty deadline, the number of buyers has continued to grow; the number of agreed purchases was up 7% in February on the same time last year. “These are strong signs that new buyer demand is not facing a cliff-edge after 31 March,” says Bannister, “It remains to be seen if this momentum will be enough to make up for the removal of the stamp duty savings that are benefitting many buyers and have been adding a sense of urgency to the whole market.”