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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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.
Nic studied for a BA in journalism at Cardiff University, and has an MA in magazine journalism from City University. She joined MoneyWeek in 2019.
King Charles banknotes to enter circulation in June
New banknotes featuring the King will enter circulation on 5 June – here’s what they will look like and what you need to know about your old notes.
By Katie Williams Published
Metro Bank to slash 5.22% savings rate for current customers- what’s the next best alternative?
Metro Bank is set to cut the rate on its best buy instant access saver for existing customers. Is there an alternative on the market and should you switch now?
By Vaishali Varu Published
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
By Kalpana Fitzpatrick Published
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
By Marc Shoffman Published
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
By Ruth Emery Published
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
By Marc Shoffman Published
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
By Ruth Emery Last updated
The top funds to invest in
Tips Tech-focused funds are continuing to attract private investors and Scottish Mortgage falls back into favour - we look at the top fund, trusts and stocks investors are pumping their money into in the last month
By Vaishali Varu Last updated
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
By Andrew Van Sickle Published
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
By Ruth Emery Published