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26 Jan 2020

Buying a house in 2020: are property prices really seeing a 'Brexit bounce'?

Discover what's really happened to house prices and sales since the election

If you've opened a newspaper this week, you're likely to have seen headlines about 'a post-election surge', a 'Boris bounce' or 'house prices rising at the fastest rate on record'.

But just how true are these claims - has the property market really enjoyed a dramatic new lease of life in the past month?

Here, we explain what's actually happened to house prices and sales, and explain why buyers could still bag a bargain in 2020.

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Post-election bounce in asking prices

New data from Rightmove shows that UK property asking prices have increased by 2.3% since the general election, now standing at an average of £306,810.

This is the biggest month-on-month rise seen in any January since the portal launched its house price index in 2002.

Nearly 65,000 properties came onto the market in the month following the election, and the portal claims that the number of sales agreed increased by 7.4% on last year's figures.

Rightmove says this reflects a 'window of stability' for the property market, with the uncertainty brought about by Brexit consigned to the past.

How important are asking prices?

It's important to remember that Rightmove's data is based on asking prices rather than actual sale prices, and its sale figures are based on offers being accepted, rather than actual completions (between a quarter and a third of agreed sales fall through).

The Land Registry offers the most reliable data on property sales because it's based on completions. However, it operates at a two-month lag, so we won't know exactly what's happened this month until the data is released in mid-March.

In the meantime, asking prices offer the most up-to-date data we have, but they only reflect what sellers and their estate agents are doing, not buyers.

Data from the property portal Zoopla published in June last year suggested that buyers actually paid around 4% less on average than the asking price set by sellers, although this varied significantly depending on supply and demand in local markets. In Edinburgh, for example, buyers paid 6% more than the asking price, while in Aberdeen they paid 8% less.

This means that while asking prices are a useful gauge of market sentiment, they certainly shouldn't be taken as gospel or deter buyers looking to bag a better deal.

How many people are moving house?

We do have some indication that more buyers are beginning to search for properties.

Rightmove claims that more than 1.3 million buyers have contacted estate agents via its website since the election, up 15% year-on-year, while estate agent Knight Frank says the number of buyers registering an interest hit its highest weekly total in more than 15 years earlier this month.

But is this renewed interest resulting in sales?

HMRC publishes data on the number of properties sold for more than £40,000 each month, and its latest figures show that sales increased by 6.8% year-on-year in December. Figures for January will be published in mid-February.

While this data suggests an upturn in the market (albeit compared to unusually low figures in December 2018), HMRC says that the current data is 'subject to continued uncertainty' due to a change in the methodology it used to calculate the results.

Will house prices rise in 2020?

There are signs that buyers and sellers are returning to the market, but there's no guarantee that we'll see significant price rises this year.

Property commentators have remained reserved in their predictions for 2020.The estate agent Savills has seen a boost in the value of its shares since the election, but has warned that 'some caution may remain until the full impact of Brexit is understood'.

The upcoming spring Budget on 11 March could also bring housing reforms affecting first-time buyers, buy-to-let landlords and overseas investors.

Rightmove, Zoopla and the Royal Institute of Chartered Surveyors (Rics) have all predicted a 2% rise in house prices in 2020.

The mortgage lender Halifax, meanwhile, has predicted growth of between 1% and 3%.

What's happening to mortgage rates?

If you're looking to buy a home this year, the good news is that mortgages are currently priced very cheaply.

Average rates on both two-year and five-year fixes fell during 2019, as shown in the graph below.

With inflation currently at a low of just 1.3%, it's possible that a cut to the Bank of England base rate could be on the way, too.

This could be good news for buyers at higher loan-to-value levels (such as 90% and 95%), where there is room for further price cuts.

Any rate drop is unlikely to have a major effect for borrowers with larger deposits, however, as the current best rates of 1.14% (two-year fix) and 1.44% (five-year fix) at 60% LTV are already among the lowest we've seen.

Advice on buying a house

Whether you're a first-time buyer, second-stepper or downsizer, Which? has advice for every stage of your property purchase.

Our step-by-step guides tobuying a house include details on everything from viewings and making an offerto choosing a conveyancer and exchange and completion.