Experts explain why house prices have gone up when they were expected to fall with the pandemic
10-26-2020
Lizzie Thompson
Remember a few months ago when young people got their hopes up that they would finally be able to afford a house? Well, reality has come crashing back down for those hopeless dreamers, as the Rightmove House Price Index for October revealed that house prices are now 5.5% higher than a year ago. That’s the biggest rate of increase for over four years. To put it frankly, the housing market is booming, when a few months ago people were predicting the uncertainty of the pandemic would finally help young people onto the property ladder. But in fact, the opposite is happening.
Why? Iain McKenzie, CEO of The Guild of Property Professionals, tells Metro.co.uk: ‘Pricing is synonymous with demand and the market has been experiencing a mini-boom since reopening [post-lockdown].
Coronavirus news live ‘Buyer demand has soared, up 34% on a year ago according Zoopla, while supply to the marketplace is at its highest level since March 2008 according to Rightmove. Over 81,000 property sales were recorded in August, which is up 15.6% on July, with competition in the market leading to one in eight properties selling at or above asking price.’ In terms of an explanation, there are a few reasons behind this unexpected boom. The first is the stamp duty holiday which was introduced back in July. As a result, many people have brought their moves forward to take advantage of the saving. David Westgate, group chief executive at Andrews Property Group, explains this in a little more detail. He tells Metro.co.uk: ‘Activity dropped off a cliff during the initial phase of lockdown in March and April, but buyer demand was still there, even if offers weren’t forthcoming. When lockdown restrictions were eased in mid-May that pent-up demand was released and buyers re-engaged. ‘The Government’s decision in early July to extend the stamp duty holiday up to £500,000 gave the market an immediate and timely boost.
‘We have seen a frenzy of activity since the tax cut as buyers and sellers have looked to make hay while the sun shines and complete transactions as soon as possible.’ Our dreams of buying a home might still be dashed (Picture: Getty Images/iStockphoto) So, what we’ve seen is a boomerang effect. At the start of the pandemic, there were all sorts of negative predictions for the housing market, but while lockdown put buying on hold it also fuelled a new demand for people wanting to move. The result? House prices increasing. Richard Hayes, CEO of Mojo Mortgages, says: ‘Following lockdown, a surge in pent-up demand led to a noticeable increase in people looking to move and searching for bigger houses, and in some cases, in more rural areas as they reassessed their priorities. ‘As a result of this demand, the housing market is very resilient at the moment and actually, what you would normally see in a recession when it comes to property prices and mortgages, just isn’t the case at the moment, with house prices reaching record levels, as shown by the recent Rightmove research.’ Another reason behind this rise in demand is the current working from home climate.
How much floorspace can you get for the average UK house price in your area? Everything you need to know about moving house during the pandemic With people spending more time than ever before at home, they are looking to make sure their environment and surroundings are right for them. People are also willing to pay a little more money to get the right type of property. Richard Hayes adds: ‘Many homebuyers are willing to pay more for their dream homes, especially if the home they have put an offer in ticks all the boxes. We’ve seen that more people are moving to out of city locations and also want extra space for a home office or additional outdoor space – so they are willing to pay more for those “must-haves.”
David Westgate adds: ‘The importance of having a decent amount of outside space during lockdown has driven huge demand for homes with gardens, especially with regional lockdowns expected to be part of our lives well into 2021. Properties with good sized gardens are being snapped up. ‘And a significant proportion of our enquiries are from city dwellers looking to relocate to less built-up areas, especially with the prospect of working from home permanently likely to become a legacy of the coronavirus for many.’
Of course, it is worth pointing out that we are still in the middle of a global pandemic and, while house prices have risen over the past few months, this doesn’t mean it will stay that way over the coming ones. Sam Mitchell, CEO of online estate agent Strike, says: ‘We can’t ignore the elephant in the room. The possibility of another large-scale lockdown and what this could mean to movers is at the forefront of our minds. If the industry has learned anything from earlier this year, it’s to prepare for all eventualities — which means adopting virtual tools and tech services to be able to continue to be there for our customers if we do see further restrictions. ‘With so much uncertainly, one thing we know for sure is that buyers and sellers wanting to move will be eager to take advantage of the stamp duty holiday by the deadline in March 2021. It’s up to us as agents to provide a service that allows them to keep calm and carry on.’