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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 boom of late, with house prices rising by 8% year-on-year – but there are signs that the market may have peaked. 

A temporary cut to stamp duty rates resulted in soaring prices, but the latest data from July shows that month-to-month price growth fell 3.7% since the 30 June tax break deadline.

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?

The property market is open and active throughout the UK, with estate agents conducting in-person house viewings and buyers able to move home.

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, but sales have dropped significantly since the tax relief ended.

Provisional data from HM Revenue and Customs (HMRC) shows that 73,740 sales went through in July, up 4% year-on-year, but down 63% on June’s figure.

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 that 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 July.

The Land Registry says that the average price of a property in the UK rose by 8% year-on-year in July to reach £255,535, as shown in the graph below.

However, as you’ll see, that’s a near £10,000 decline on the figure for June. This is likely due to the rush of transactions that took place in June in order to make the stamp duty deadline at the end of that month.

Rightmove’s house price index is more up to date, but it’s based on asking prices rather than sold prices. In August’s report, it found that average asking prices had fallen by 0.3% month-on-month, but risen by 5.6% year-on-year.

Nationwide’s index (based on mortgage lending) reported a 2.1% monthly and 11% annual rise in prices in August. Halifax’s index (also based on lending) reported a 0.7% monthly and 7.1% annual increase.

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 July was 36 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.’

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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.

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.

Row of houses

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.

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 15 September 2021.

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