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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 enjoyed a mini boom in the second half of 2020, but doubts remain over whether house prices will continue to rise once the government’s stamp duty cut ends in April. 

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, Wales and Northern Ireland are open, meaning estate agents are conducting in-person house viewings and buyers are able to move home, despite the lockdown measures currently in place.

Since last July, the UK property market has been 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 31 March this year.

Transaction numbers have risen significantly. Provisional data from HM Revenue and Customs (HMRC) shows that 115,190 property sales went through in November 2020, up 19% year-on-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 continuing lockdown measures, the figures could continue to fluctuate.

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 November.

The Land Registry says the price of a property in the UK increased by 1.2% month-on-month and 7.6% year-on-year in November, to reach £249,633.

Rightmove’s index is more up-to-date, but it’s based on asking prices rather than sold prices. In January’s report, it found average asking prices had dropped by 0.9% month-on-month but risen by 3.3% year-on-year.

Nationwide’s index (based on mortgage lending) reported a 0.8% monthly and 7.3% annual rise in prices in December, while Halifax (also based on lending) reported a 0.2% monthly and 6% annual increase.

Property market predictions

There’s optimism around the property market at the moment, with Rightmove saying the average time to agree a sale was just 57 days in December, compared to 71 days a year earlier.

Experts are split on whether this will last, however, with some believing 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.

  • Rightmove forecasts that house prices will rise by 4% in 2021. It predicts a lull in the second quarter of the year once the stamp duty cut ends, but says this won’t be ‘make or break’.
  • Zoopla predicts annual house price growth will reach 5% in February, before slowing to 1% by the end of 2021.
  • Halifax says house prices will fall by between 2% and 5% this year.
  • The estate agents Savills and Hamptons both believe house prices will stay the same in 2021. Chestertons predicts a 1.5% increase and Knight Frank a 1% rise.
  • The Centre for Economics and Business Research (CEBR) predicts house prices could fall by 5%.
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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.

Have I left it too late for the stamp duty cut?

The stamp duty cut has placed a huge strain on estate agents, house surveyors and conveyancers.

The increased demand has resulted in house moves slowing down significantly, with reports of mortgage valuations taking weeks to come through and legal work being caught in a log jam.

A group of 14 trade bodies from across the industry wrote to the Chancellor in November to ask him to extend the stamp duty break by at least six months, but these calls have so far been rejected.

Rightmove says there are currently 613,000 ‘sold subject to contract’ properties awaiting completion, so if you’re hoping to buy a home before the stamp duty holiday ends on 31 March, time may be against you.

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.

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 four 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, though a host of banks have started to relaunch 90% mortgages.

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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