The UK property market is enjoying a boom right now, with house prices rising by 10% year on year.
This increase has been fueled by a temporary cut to stamp duty, but with the tax break now tapering off, the speed of price growth could be set to slow.
Here, Which? explains what’s happening to house prices and provides advice on making an offer on a property in these uncertain times.
- Keep up to date on the latest coronavirus news and advice with Which?
What’s happening to the property market?
Since last July, the UK property market has been on the rise, led by the government temporarily cutting stamp duty.
The biggest savings of up to £15,000 ended on 30 June, but buyers in England and Northern Ireland can still save up to £2,500 if they buy a home before the end of September.
Transaction numbers soar as buyers chase tax cuts
The number of houses being sold rose significantly during the tax holiday.
Provisional data from HM Revenue and Customs (HMRC) shows that 198,240 sales went through last month, as buyers battled to secure properties before the 30 June deadline.
The smaller spike in March reflects the original stamp duty deadline, before it was extended to June.
The graph below shows the number of sales registered each month since the start of 2020.
How have house prices changed?
We’re getting a clearer picture of the impact coronavirus has had on house prices, but the stamp duty holiday and continued uncertainty over what will happen next with the pandemic means 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 property prices. It works on a two-month lag, so the latest available figures are for May.
The Land Registry says the average price of a property in the UK rose by 10% year-on-year in May to reach £254,624, as shown in the graph below.
Rightmove’s house price index is more up-to-date, but it’s based on asking prices rather than sold prices. In July’s report, it found average asking prices had risen by 0.7% month-on-month and 5.7% year-on-year.
Nationwide’s index (based on mortgage lending) reported a 0.7% monthly rise and 13.4% annual rise in prices in June. Halifax’s index (also based on lending) reported a 0.5% monthly drop and 8.8% annual increase.
- Find out more: should you pay attention to house price indices?
What will happen in the remainder of 2021?
There’s been a great deal of optimism around the property market of late, with buyers competing over homes in the most sought-after areas.
Research by Rightmove found the average time to agree a sale in June was 38 days, the lowest figure registered since the start of the pandemic.
This figure has been strongly influenced by the stamp duty holiday, and we could see sales take longer once the tax break and the government’s financial support schemes come to an end.
Lack of supply will keep prices high
The recent rise in demand from buyers hasn’t been met by a flurry of new properties coming on to the market, and this imbalance could keep prices high in the coming months, even with smaller tax savings on offer.
Mark Hayward of the estate agency group Propertymark says: ‘The market is experiencing a growing imbalance of supply and demand, and we see no indication that supply levels will increase. We firmly remain in a strong seller’s market which will impact house prices as buyers bid to secure their dream home.
‘In order to stop a multitude of viewings for a property while restrictions are still in place, agents have been able to revert to the traditional practice of creating a hot-list of able buyers who can act quickly.’
How does the stamp duty holiday work?
In England and Northern Ireland, the temporary tax-free threshold of £500,000 ended on 30 June.
Between now and 30 September, the threshold is £250,000, before returning to £125,000 for home movers from October.
The Welsh stamp duty holiday ended on 30 June, and Scotland’s tax break ended on 31 March.
- Find out more: stamp duty calculator – how much will you pay?
How do house viewings work at the minute?
During last year’s lockdown, estate agents began offering video house viewings, and these are continuing to play a part despite the recent lifting of restrictions.
The government’s latest guidance recommends that buyers should first view properties virtually wherever possible.
If you then a house in person, you may find that the estate agent requests you wear a mask and sanitise your hands when entering the property.
- Find out more: should you buy or rent a home based on a video viewing?
Is it possible to get a good mortgage deal?
Since the pandemic began, the number of mortgage deals on the market has fallen dramatically, but there are now plenty of good rates out there – especially if you have a bigger deposit.
Data from Moneyfacts shows that average rates are falling, with some banks now offering mortgages with rates below 1%.
Buyers with deposits of 5% and 10% have been hardest hit by deals being withdrawn, though first-time buyers have been handed a boost by the new 95% mortgage guarantee scheme, which launched in April.
Buyers locking in low mortgage rates
David Hollingworth of L&C mortgages says: ‘Mortgage rates remain competitive, and this will help boost borrower affordability and confidence. Availability for those with smaller deposits has been improving, with lenders returning to the 90% and 95% mortgage markets.
‘With demand still high as we begin to see restrictions ease, there’s little to suggest that house prices will face a hit in the near term.
‘Overall, home buyers have been showing that they remain confident enough to move during a pandemic and take advantage of low mortgage rates.
‘Borrowers can fix their rate in order to protect against any potential future fluctuation, and many have taken the opportunity to do so.’
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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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 21 July 2021.