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How is coronavirus affecting house prices?

Discover what the pandemic means for buyers, sellers and homeowners

How is coronavirus affecting house prices?

The UK property market has enjoyed a mini boom since reopening after the lockdown and the government’s stamp duty cut could result in more people moving home over the next few months. 

Here, Which? explains what’s happening to house prices and provides advice on making an offer on a property in these uncertain times.

What’s happening to the property market?

Property markets in England, Scotland and Northern Ireland are open, meaning estate agents are conducting in-person house viewings and buyers are able to move home. This could change as the COVID-19 situation develops, so check the guidelines in your local area.

From 6pm on 23 October, high-street estate agents in Wales must close and in-person viewings will be banned until 9 November. House moves can still go ahead if they can’t be delayed until after this date.

The UK property market is on the rise, largely fuelled by the government temporarily cutting stamp duty. The breadth of the cuts vary from country-to-country, but they mean buyers could potentially save up to £15,000 in tax if they move home before April 2021.

Transaction numbers have recovered quickly since the market reopened. Provisional data from HM Revenue and Customs (HMRC) shows that 98,010 property sales went through in September, up 21% on August’s figures and down just 0.7% on last year.

How have house prices changed?

We’re beginning to get a clearer picture of the impact coronavirus has had on house prices, but with the ongoing stamp duty holiday and the prospect of further lockdown measures, figures could fluctuate significantly in the coming months.

The most reliable barometer of house prices is the Land Registry’s UK House Price Index, which is based on sold properties. It works on a two-month lag, so the latest available figures are for August.

The Land Registry says the price of a property in the UK increased by 0.7% month-on-month and 2.5% year-on-year in August, to reach £239,196.

Rightmove’s index is more up-to-date, but it’s based on asking prices rather than sold prices. In October’s report, it found average asking prices had risen by 1.1% month-on-month and 5.5% year-on-year.

Nationwide’s index (based on mortgage lending) reported a 0.9% monthly and 5% annual rise in prices in September, while Halifax (also based on lending) reported a 1.6% monthly and 7.3% annual increase.

Property market predictions

There’s a great deal of optimism around the property market at the moment, with Rightmove saying the average time to agree a sale fell to just 50 days in September, and Zoopla claiming demand from buyers is up 39% year-on-year.

This might not last, however. Experts believe the market (and house price growth) could slow down once the government’s coronavirus financial support schemes and the stamp duty cut come to an end.

  • 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 says the market is likely to continue performing well in the short-term, but buyers and sellers ‘still need to be mindful of the wider economic concerns’.
  • Zoopla believes that prices and activity will remain stable until the end of the year.
  • The Centre for Economics and Business Research (CEBR) predicts house prices could fall by 14% in 2021.
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Will the stamp duty cut affect house prices?

Mid-range buyers in more expensive parts of England are likely to be the biggest beneficiaries of the stamp duty cut, with savings of £10,000 on a £400,000 property and £15,000 on a £500,000 property encouraging more moves.

In the short term, this could theoretically make house prices rise, especially on properties in sought-after areas within commuting distance of major cities.

But buying a home based on the stamp duty cut could be a dangerous move, as you might pay a premium now and then see the property’s value fall over the next 12 months.

When considering how much to offer, do your research and remember that the estate agent works for the seller, so will be looking to get as high a price as possible. If you’re unsure, consider taking advice from another agent or a specialist buying agent.

How do house viewings work at the minute?

During the lockdown, estate agents began offering video house viewings and these will still play a part.

The government’s latest guidance says buyers should use virtual viewings to filter properties and only view homes in-person once they’re seriously considering making an offer.

In-person viewings must follow social distancing measures. You must wash or sanitise your hands when entering homes and avoid touching surfaces. If social distancing isn’t possible, both viewers and agents should consider wearing a face mask.

From 6pm on 23 October until 9 November, agents in Wales won’t be permitted to conduct in-person viewings, but virtual viewings will be permitted.

Row of houses

Is it possible to get a good mortgage deal?

Since the COVID-19 pandemic began, the number of mortgage deals on the market has halved, but there are still plenty of good rates out there – especially if you have a bigger deposit.

Data from Moneyfacts shows that average rates have been on the rise in the last three months, but they still remain lower than pre-pandemic levels.

Buyers with deposits of 5% and 10% have been hardest hit by deals being withdrawn, with nine in 10 low-deposit mortgages disappearing.

Which? coronavirus advice

Experts from across Which? have been compiling the advice you need to stay safe, and to make sure you’re not left out of pocket.

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