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UK house prices: stamp duty holiday and low interest rates fuel ‘mini boom’ with homes now £24,000 more than pre-pandemic

·3-min read
 (Shutterstock / ZGPhotography)
(Shutterstock / ZGPhotography)

Buyers are paying £24,000 more for a home in the UK than they were before the Covid-19 pandemic hit last March, according to new Government figures published today.

The index from the Office of National Statistics reports that UK sales values grew at their fastest pace in the year to March since right before the global banking collapse of 2007.

The average UK property cost £256,000 this March, £24,000 more than in March 2020, and prices rose again 2.1 per cent between February and March.

Annual price growth was highest in Wales and Scotland. Average values increased over the year in England to £275,000 (10.2 per cent), in Wales to £185,000 (11 per cent), in Scotland to £167,000 (10.6 per cent) and in Northern Ireland to £149,000 (six per cent). Of all the regions in England, rises were greatest in Yorkshire and Humberside.

The swell in demand for more space, in combination with the Chancellor’s emergency and extended stamp duty holiday, has created a mini boom across the nation that is not showing signs of slowing yet, experts believe.

“A shift in preferences towards larger properties, an accumulation of more than £140 billion of savings over the last year, low interest rates and the stamp duty holiday continue to drive house price growth. We expect that these forces will continue to support price growth over the coming months, even as the stamp duty holiday winds down,” says Jamie Durham, economist at accountancy firm PwC.

“The spread of the new variant in the UK, and possibility of measures to contain it, is unlikely to have a material impact on the housing market, given price growth remained strong during the most recent lockdown,” Durham adds.

London house price growth lags behind the UK

However, London house price growth was outpaced by the regions, as urbanites in the capital continue to relocate further from the office with the possible prospect of permanent working-from-home. Sales values rose 3.7 per cent in the 12 months to March, the slowest rate across the nation. This still equates to an uplift of £20,000 over the course of the pandemic.

The cost of a pre-existing home (particularly the terraced house) in the capital increased by as much as 6.9 per cent to £505,448 but the the sales price of a new build home (typically an apartment) fell 1.1 per cent over the same period, pulling down the average. London has more apartments than any other area of the country.

The analysis also shows that the most active buyers were families already on the housing ladder and looking to upsize their property and garden in the wake of the lockdowns.

Will interest rates rise?

The mortgage lender Nationwide’s latest monthly survey suggested that house price growth accelerated further in April. Britain’s biggest buildings society predicted that high demand and limited number of homes on the market could fuel a summer boom, with house prices possibly returning to double-digit annual growth rates by June.

However, there is some risk to the outlook if inflation takes hold and banks increase interest rates, explains Durham. “This would affect mortgage affordability criteria, lending, and could ultimately weigh on house price growth, though the impact of this will depend on how high inflation rises,” he says.

Read More

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