Much has been said about the pent-up demand for moving home since the UK’s initial lockdown prohibited many property sales in Q2 2020.
Since then, the housing market has seen a surge in sales with a stamp duty holiday, increased savings from reduced commuter costs and lower outgoings overall, resulting in more mortgage approvals in 2020 than the year prior. Despite the pandemic shutdown, 818,550 mortgages were approved, the highest number since 2007, but in such unpredictable times, what can we expect from house prices in 2021 and beyond?
According to the ONS, the average UK house price has increased almost £100,000 in the past ten years to £252,000, the highest average figure the country has ever recorded. In the last year alone the average house price in England alone has grown by 8.5% ar to £269,000, representing an average increase of £21,000 per home. In 2020, the average house price in London hit a whopping £500,000 for the first time in history. In addition, house prices in Wales grew by 10.7%, the highest growth ever recorded in the Wales, Scotland’s prices grew by 8.4% and Northern Ireland saw an increase of 5.3%.
The highest regional growth rate in the UK was seen by the North West, which saw average prices increase by 11.2% from the previous year, followed by Yorkshire, the East Midlands and the South West who all saw increases of 10% or more. The growth rate in rural areas is expected to continue to increase as buyers’ interests continue to change in light of the Covid-19 pandemic; with more people working from home, there is less interest in living in urban hubs.
Deposits averaged £42,433 in 2020, down 12.6% from 2019. This figure is expected to decline further with the UK government recently announcing a mortgage guarantee scheme to encourage more banks to lend to buyers with 5% deposits. Rishi Sunak suggested the scheme would turn “generation rent into generation buy”. Whether that prediction rings true remains to be seen, but we fully expect to see more first-time buyers get their feet on the property ladder. In spite of the recent turbulent times and uncertainty, we anticipate house prices to grow in the short term, with Savills recently upgrading their predicted average property price for 2021 from levels of stagnation to a 4% rise, in part because of the recent extension of the stamp duty holiday.
Locked down for the better part of a year, people have been able to save more money than ever before with many individuals using these savings to contribute towards a house move. With an extra £180 billion accrued in Briton’s bank accounts – or equivalent to nearly 10% of the UK’s gross domestic product – buyers are able to pay higher deposits and are more likely to be accepted for a mortgage on a higher priced property than they would have otherwise been able to.
All that said, predictions are just that, predictions, however2021 has been, and will continue to be, a seminal year for the housing market.