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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 been enjoying a mini boom of late, 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 since the change was announced.

Provisional data from HM Revenue and Customs (HMRC) shows that 121,640 sales went through in January, up 24% 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 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 December.

The Land Registry says the price of a property in the UK increased by 1.2% month-on-month and 8.5% year-on-year in December, to reach £251,500.

Rightmove’s index is more up-to-date, but it’s based on asking prices rather than sold prices. In February’s report, it found average asking prices had risen by 0.5% month-on-month and 3% year-on-year.

Nationwide’s index (based on mortgage lending) reported a 0.3% monthly drop and 6.4% annual rise in prices in January. Halifax (also based on lending) reported a 0.3% monthly drop and 5.4% annual increase.

Property market predictions

There’s optimism around the property market at the moment, but there are signs that the initial rush caused by the stamp duty break is beginning to cool.

Research from Rightmove found the average time to agree a sale in January was 65 days, well down on the 76 days recorded a year earlier, but significantly longer than the record low of 49 days in October 2020.

Some 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.

  • 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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Has the stamp duty cut affected house prices?

Mid-range buyers in more expensive parts of England have been 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 home, thousands of upsizers have been battling to beat the deadline.

But buying a home because of the stamp duty cut can be a dangerous move, as this increased competition means some buyers may end up paying a premium.

Data from Halifax shows that the prices of detached properties rose by 10% in 2020, considerably more quickly than any other type of home.

This rise in house prices means that those who are too late for the stamp duty cut may be end up being no worse off if house prices stabilise or fall later this year.

Will the government extend the stamp duty cut?

The stamp duty cut has placed a huge strain on estate agents, house surveyors and conveyancers, resulting in house moves slowing down significantly.

This has led to industry groups calling for the cut to be extended, but so far these pleas have fallen on deaf ears.

The latest rumours are that the break could be extended by six weeks, allowing those who’ve already agreed a move a little longer to get it over the line.

The Chancellor set to give his Spring Budget speech on 3 March, so it’s possible that we may need to wait until then to get a definitive answer.

Find out more: will the stamp duty cut be extended?

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 overall 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 relaunched 90% mortgages in the last couple of months. 

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.

  • Keep up to date on the latest coronavirus news and advice with Which?

  • This story was originally published in March 2020. It is regularly updated with the latest figures from various leading house price indices. The last update was on 23 February 2021.

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