House price rise slows – but not by much
The rate of increase in UK house prices slowed in the year to January. But nothing seems able to halt their determined march higher, says Nicole Garcia Merida.
House prices in the UK saw a 7.5% increase over the year to January 2021, the Office for National Statistics’ latest house price index revealed. That’s down from the 8.0% increase the market saw in December, but it confirms what we have been saying for some time now: houses are getting more expensive.
An average house in England would set you back £267,000 in January 2021 compared to £247,355 a year before. The northwest of England saw the highest annual growth in average house prices with a 12% surge, while the West Midlands saw the lowest at 4.7%.
The past four years saw a “general slowdown” in UK house price growth. Things seemed to be heating up at the beginning of 2020, which saw a pick-up in annual growth in the market. But that was short-lived, as lockdown restrictions were put in place at the end of March.
Lockdown changed buyers' priorities
However, prices have been growing steadily since lockdown measures were first eased, exacerbated by the stamp duty holiday announced by the chancellor in early July. Not having to pay as much tax on properties valued at up to £500,000 freed up some extra spending money, which enabled sellers to ask for higher prices, and gave buyers the ability to meet them.
Data by property portal Zoopla showed the latest Budget, in which Rishi Sunak announced an extension of the stamp duty tax holiday until June, stimulated an 80% spike in buyer demand for property compared to the four year average. But there simply aren’t enough homes, according to Zoopla, and the imbalance between supply and demand is exerting further pressure on house prices, sending them up. This is predicted to continue throughout the second quarter of 2021.
In a sign of how the pandemic has changed priorities for buyers, houses are now selling three weeks faster than flats. Once buyers found themselves permanently at home due to lockdown many reevaluated their needs and prioritised space over being close to city centres. Demand for three-bed homes was up 30% in the week after the Budget was announced, and they continue to be the most coveted type of property across the UK.
London could be regaining its attraction
The twin effects of the 95% mortgage guarantee and the stamp duty tax holiday also saw an increase in demand for one- and two-bed flats in London and the southeast, which indicates “increased buying intent” among those buying for the first time.
It’s not just buyers who are considering returning to the capital. The promise of an end to lockdown also saw rental searches surge in London zones one and two. Many renters left London last year as part of a mass exodus that saw office workers trade the city for more space and cheaper rents. According to Rightmove, data from last summer reflected people wanting to move to quieter areas further away from London as home working became the norm. But the tide appears to be turning; annual growth of rental searches in inner London is outperforming last summer’s search activity. So essentially, all the people who left the city because they no longer needed to commute might be looking to come back as both work and leisure venues promise to open back up again.
It’s not a stretch to say that the pandemic has forever changed buyers’ priorities. The shift towards home working seems to be here to stay, at least in a hybrid form. The “race for space” could very easily turn from a sprint into a marathon, and a very costly one at that.