After a record breaking year, the hot covid housing market has peaked and is set to cool, a new study reveals.
More homes were sold in the first half of 2021 than any year since 2007, which equates to 1.5 million completions across the country.
The four-walls syndrome during the lockdowns, in combination with the Government’s stamp duty holiday (which has now ended), propelled the housing market despite the restrictions and financial uncertainty.
The prospect of working-from-home, even after the acute phase of the pandemic, convinced families to upsize out of the cities. This drove the first true recovery in the country homes market since the global financial crisis, with many family-sized homes in the expanded London commuter belt going to sealed bids.
However, price growth peaked in the summer and will now start to stabilise as workers head back to the office, the report by Hamptons reads.
House prices across Britain will end 4.5 per cent higher at the end of 2021 than at the start of the year, and 1.5 per cent for London.
“The housing market confounded expectations and forecasts in past months. Back in the autumn of 2020, such were the economic challenges being faced that we could not have envisaged the extraordinary demand for relocation which we have seen this year,” says Aneisha Beveridge, head of research for Hamptons.
“There has been a huge attitudinal change towards property, which cannot be attributed to stamp duty alone. People now place a higher value on their homes, having spent more time in them than ever before. Flexible and remote working have encouraged households to make bigger moves,” she says.
London house prices lag the UK
House prices are forecast to rise across the country by 3.5 per cent next year with the fastest rate of growth in the north of the country, Wales and Scotland where affordability constraints are lower and the house price to earnings ratios are smaller.
Rising wages will feed into this as will low interest rates.
These forecasts are based on the current spike in energy and food prices being temporary and interest rates not set to incrementally rise until the end of 2022 or into 2033.
The London housing market is expected to underperform the rest of the country with the weakest house price growth of one per cent next year. The rate of growth will nudge up in 2023 to 1.5 per cent and by 3.0 per cent in 2024. By this point annual house price rises will over take the rest of the country.
The four-year forecast for house price rises across Great Britain sits at 13.5 per cent by 2024 and seven per cent in Greater London.
“At this stage in the property cycle it is normal to see price growth in the regions outperform London,” says Beveridge. But the pandemic has “aggregated” this as some people move further from the capital where there is more space for less money. She puts slower price rises in London down to stretched affordability and high values.
However, by 2024 Beveridge expects the luxury housing market in the centre of London to pick back up as international buyers, students and tourists return in earnest.
“Although, we won’t see the same level of bounce back as we saw after the banking crash,” she adds.