British house prices have increased by 5 per cent in just one year – but experts say the post-lockdown market boom will fizzle out after a peak in October.
Buyers should cash in on the upcoming market dip, however, as the next five years are set to see house prices rising again across England – with the North West seeing the largest hike of 27.3 per cent.
This year’s hike of 5 per cent – which put an average £9,415 on a property – is the highest seen in four years, mortgage lender Nationwide said on Wednesday, as a sharp rebound in the country’s housing market accelerated.
Countless Britons have rushed to cash in on Rishi Sunak’s stamp duty cuts announced in July – allowing buyers to avoid paying the tax on houses up to £500,000.
Also contributing to the initial housing boom was the nation’s pent-up buyer demand post-lockdown as well as a rush by some buyers for bigger houses outside of urban areas in the new work-from-home age.
Nationwide said about 10 per cent of people it surveyed in September were in the process of moving as a result of the pandemic, rising to 15 per cent in London.
- 0.1 What is the average house price in each UK region?
- 0.2 How much will house prices grow between 2020 and 2024?
- 1 What sort of property will UK region’s average house prices afford – and how much more will they be worth in five years?
- 2 East Midlands
- 3 Scotland
- 4 South West
- 5 London
- 6 Yorkshire and the Humber
- 7 Wales
- 8 West Midlands
What is the average house price in each UK region?
- South West £260,316
- Outer Met £376,682
- Outer South East £291,404
- Yorkshire and the Humber £167,816
- London £480,857
- North £132,898
- East Midlands £194,749
- Wales £165,423
- West Midlands £200,622
- North West £171,675
- East Anglia £238,896
- Scotland £153,347
- Northern Ireland £146,152
UK average: £224,337
A further 18 per cent of those asked said they were considering moving due to the pandemic.
But the buzz is set to fade out in the coming months with unemployment expected to rise sharply and Covid-19 cases increasing again.
Online searches for the UK’s main property websites have dropped after their initial surge, with forecasters warning this signals the end of the market upturn.
Google search data suggests showed a drop off in the number of potential buyers visiting the three main property sites.
Analysis by Pantheon Macroeconomics found interest in key phrases, such as ‘Rightmove’, ‘Zoopla’ or ‘On The Market’ slowed from a peak in late August, dropping by seven per cent in September.
Samuel Tombs, chief UK economist at the analysis firm, said: ‘Online search data suggest the initial wave of demand for bigger homes caused by Covid-19 now is fading… Recent gains in house prices likely will not be sustained.
‘We expect the official measure of prices to peak in October, to around three per cent above its pre-Covid level in March, and then fall by three per cent over the following 12 months.’
And potential buyers should cash in on the dip while they can, as estate agent Savills predicted that prices across Britain will increase by 4 per cent during 2020, before flattening out across 2021, with no real movement.
Prices are then expected to pick up again, so that over the five-year period starting in 2020 and ending in 2024, prices will grow by around a fifth (20.4 per cent).
Expectations that interest rates will stay lower for considerably longer will underpin the growth, Savills said.
How much will house prices grow between 2020 and 2024?
Here are Savills’ new predictions for house price growth over the five years between 2020 and 2024:
- London, 12.7 per cent
- South East, 17.3 per cent
- East of England 17.3 per cent
- South West 17.3 per cent
- East Midlands 22.6 per cent
- West Midlands 21.7 per cent
- North West, 27.3 per cent
- Yorkshire and the Humber, 24.1 per cent
- North East, 21.7 per cent
- Wales, 22.3 per cent
- Scotland, 25.4 per cent
Over the five-year period, the regional pattern of price growth is expected to reflect the stage the housing market cycle was at before Covid-19, the report said.
This points to markets further from London being the strongest performers, with price growth expectations for the North West of England at 27.3 per cent and in Scotland at 25.4 per cent, for example.
The average property price in London stands at £480,857 – after the five per cent rise seen in the last year.
Savilles predicts a 12.7 per cent rise in property price in London, putting that average at £541,926 in the next five years.
In Yorkshire and the Humberside, the current average price is £167,816. After the predicted rise 24.1 per cent rise, this would be an average of £208,260.
Meanwhile the current average house price is £153,347 in Scotland. A 25.4 per cent increase would make prices £192,297 on average.
The 5 per cent increase in property price reported so far was stronger than the median forecast of a 4.5 per cent rise in a Reuters poll of economists – average prices hit a fresh record high.
Nationwide’s chief economist Robert Gardner said: ‘Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.’
The mortgage lender said prices rose by 0.9 per cent in September from August compared with a forecast of a 0.5 per cent increase in the Reuters poll.
House prices in early September hit a record high, a report from Halifax revealed earlier this month.
Property prices were 5.2 per cent higher than the same month a year earlier and property values were up by 1.6 per cent month on month.
It follows reports that more than one million houses will sell by the end of the year.
Countless Britons have rushed to cash in on Rishi Sunak ‘s stamp duty cuts announced in July – allowing buyers to avoid paying the tax on houses up to £500,000
Google searches of the main property websites has dropped, data from the online search engine shows, indicating that the UK housing market boom is set to fizzle out
This graph shows the change in house prices over the past four years across all the nations of the UK, with prices set to drop after the steep rise post-lockdown
Government figures show house prices have increased by two per cent of greater in every part of the UK bar Northern Ireland and the South East
In Belfast, this three-bedroom semi-detached house is on the market for £100,000. Northern Ireland’s average house price is £146,152
In Derby, Derbyshire, this three-bedroom house with ample garden space is on the market for £190,000. The average house price in the East Midlands is £194,749. This is set to rise by 22.6 per cent in the next five years making it worth £238,762
This two-bedroom detached bungalow is on the market for £240,000 in Mundford. The average house price in East Anglia is £238,896
This two-bedroom terraced house in Sheddocksley, Aberdeen, is on the market for £150,000. A 25.4 per cent increase in five years would make this property worth £188,100
This three-bedroom terraced house in Essex – fit with a swimming pool – costs £375,000. The average house price in the Outer Met is £376,682
Savills said it expects around 1.06 million house sales across Britain in 2020 – with the market favouring established home owners and cash buyers.
Furthermore the number of mortgage approvals jumped to its highest levels since 2007 in August, the Bank of England said.
Some 84,700 approvals for house purchase were recorded, marking the highest number since October 2007, according to the Bank’s money and credit report.
The 1.06 million predicted house sales figure is around a quarter of a million more than it had previously predicted – prior to the Chancellor’s temporary stamp duty holiday.
The holiday applies to England and Northern Ireland and raises the ‘nil rate’ band of stamp duty to £500,000 until March 31.
Similar measures have taken place in Scotland and Wales, which have different property taxes.
Savills had originally forecast 775,000 sales this year, but revised its prediction in the light of the ‘mini boom’ – and noted that constraints on new borrowers mean conditions favour those with equity, creating a market dominated by mortgaged home movers and cash buyers.
Against a backdrop of job loss announcements across several industries, lenders have pulled many low-deposit mortgages in recent months as this is seen as riskier lending.
This two-bedroom flat in London is on the market for £475,000. House prices in London are set to increase by 12.7 per cent in the next five years – making this property worth £535,325
This three-bedroom property in Sawbridge – in the Outer South East – is up for sale for £290,000. Average prices in the region are £291,404
But even so, the number of mortgage approvals made to home buyers jumped to its highest levels since 2007 in August, the Bank of England said.
Some 84,700 approvals for house purchase were recorded, marking the highest number since October 2007, according to the Bank’s money and credit report.
The Bank said the jump only partially offsets weakness seen between March and June.
In total, there have been 418,000 approvals in 2020, compared with 524,000 in the same period in 2019.
Lucian Cook, Savills’ head of residential research, said: ‘While we clearly can’t ignore the economic backdrop, other factors, including a stamp duty holiday, have unleashed an unexpected wave of activity in the market and added to the pent-up demand coming out of lockdown.
‘Many people are reassessing their work-life balance, seeking a change of location or a trade up the ladder. The unexpected stamp duty holiday has given a further boost to the market, particularly in higher value locations through the commuter zone and lifestyle relocation hotspots.
‘The end of that stamp duty holiday and a projected rise in unemployment are expected to cause the market to slow in 2021, with the very real prospect of price falls at points during the year, hence our forecast of zero annual growth.
‘But from a mortgage affordability perspective, a fall in the income growth forecast has been outweighed by the expectation of a continuation of ultra-low interest rates over our forecast period as a whole. That provides more capacity for house price growth over the medium term, tempered by the impact on loan-to-income ratios and mortgage deposit requirements.’
NAEA (National Association of Estate Agents) Propertymark reported this week that about one in eight homes sold in August went for more than the original asking price – marking the highest proportion in nearly five years.
Looking to the months ahead, economist Mr Tombs said a recent increase in mortgage rates, particularly for low deposit loans, ‘will make purchases unaffordable for many first-time buyers’.
He continued: ‘The outlook for a further drop in employment also will weigh on the housing market, though with home ownership having narrowed to a wealthier segment of the population over the last decade, job losses won’t have as devastating an impact on the market as they did in 2008.’
The report also showed that interest rates on overdrafts jumped in August.
This three-bedroom semi-detached house in Sherburn Village in County Durham is on the market for £130,000. The average house prices in the north are £132,898
The ‘effective’ rate – the actual interest rate paid – on interest-charging overdrafts rose by 4.2 percentage points to 19 per cent in August.
This is the highest rate since similar records started in 2016 and compares to a rate of 10.32 per cent in March 2020, before new rules on overdraft pricing came into effect.
Under the new Financial Conduct Authority (FCA) rules, overdraft providers have to charge one single rate of interest rather than adding on other charges.
Before the coronavirus pandemic, many providers announced new rates which were around double what many people with an authorised overdraft had previously been on.
The FCA has introduced guidance for firms to help overdraft customers who have been facing temporary financial difficulties due to the coronavirus pandemic. As part of this, borrowers have been offered a temporary £500 interest-free overdraft buffer.
The report also said typical rates on new personal loans increased a little in August, to 4.71 per cent.
The typical cost of credit card borrowing was broadly unchanged at 17.95 per cent in August.
Households’ deposits increased by £5.2 billion in August. That was lower than the increase of £6.5 billion in July and below the average of £17.2 billion between March and June.
The returns savers were getting tumbled further in August. The effective interest rate on new deposits fell to a new low of 0.50 per cent, the Bank said.
Mr Tombs said the Bank’s report seems to reflect households returning to spending most of their income, following a period of ‘enforced’ saving during the full lockdown in the second quarter of 2020.
He added: ‘High unemployment, however, likely will prompt households to maintain a large savings buffer over the next year, ensuring that spending does not exceed households’ diminished incomes over the coming quarters.’
Alistair McQueen, head of savings and retirement at Aviva, said: ‘A large proportion of households are likely to shift to precautionary saving in anticipation of further economic turmoil caused by the reintroduction of stricter local lockdown measures.
‘This will dent consumer spending, which will curb the UK’s economic recovery.’
What sort of property will UK region’s average house prices afford – and how much more will they be worth in five years?
The East Midlands covers areas including Derbyshire, Leicestershire, Lincolnshire and Northamptonshire.
Mortgage lender Nationwide reported that the average house price in the region is £194,749 – which estate agent Savills say will spike by 22.6 per cent in the next five years.
This three-bedroom town house in Derby – which boasts three storeys, a driveway and a garage – is on the market for £190,000 with estate agent AKS Residential.
With the percentage increase, this property could be worth £238,762 in five years.
This three-bedroom town house in Derby – which boasts three storeys, a driveway and a garage – is on the market for £190,000 with estate agent AKS Residential
With the percentage increase, this property could be worth £238,762 in five years. Pictured: The house’s living room
The current average house price is £153,347 in Scotland – but it is set to see a 25.4 per cent increase.
This property in Sheddocksley, Aberdeen, is on the market for £150,000 with estate agent Purple Bricks. A 25.4 per cent increase in five years would make this property worth £188,100.
This property in Sheddocksley, Aberdeen, is on the market for £150,000 with estate agent Purple Bricks . A 25.4 per cent increase in five years would make this property worth £188,100
The average price for properties in the South West is £260,316 which is set to increase by 17.3 per cent.
This two-bedroom semi-detached house in Kingswood, Bristol, is on the market for £260,000 with estate agent Andrews.
In five years, this property could be worth £304,980 after the price hike.
This two-bedroom semi-detached house in Kingswood, Bristol, is on the market for £260,000. The average price for properties in the South West is £260,316 which is set to increase by 17.3 per cent. In five years, this property could be worth £304,980
The house is on the market for £260,000 with estate agent Andrews. Pictured: The house’s light and airy kitchen
This two-bedroom flat in London is on the market for £475,000 with estate agent Ludlow Thompson.
House prices in London are set to increase by 12.7 per cent in the next five years – making this property worth £535,325.
This two-bedroom flat in London is on the market for £475,000 with estate agent Ludlow Thompson
House prices in London are set to increase by 12.7 per cent in the next five years – making this property (one room pictured) worth £535,325
Yorkshire and the Humber
This three-bedroom property in Guisborough, North Yorkshire, is on the market for £160,000 with estate agent GSC Grays and boasts a front and back garden.
The average house price in the region is £167,816 – which is set to increase by 24.1 per cent making this property worth £198,560.
This three-bedroom property in Guisborough, North Yorkshire, is on the market for £160,000 with estate agent GSC Grays and boasts a front and back garden
The average house price in the region is £167,816 – which is set to increase by 24.1 per cent making this property worth £198,560 (one room pictured)
This three-bedroom flat in Cardiff is on the market for £160,000 with estate agent Peter Alan.
Properties in Wales are set to go up in value by 22.3 per cent making this property worth £195,680.
This three-bedroom flat in Cardiff is on the market for £160,000. House prices are set to rise by 22.3 per cent in Wales making this property £195,680
This three-bedroom semi-detached house in Birmingham is on the market for £200,000 and is being sold via estate agent Burchell Edwards.
West Midland’s houses will increase in value by 21.7 per cent, according to Savills, potentially making this property £243,400.
This three-bedroom semi-detached house in Birmingham is on the market for £200,000. Property prices in the West Midlands are set to go up by 21.7 per cent in five years making this house worth £243,400
West Midland’s houses will increase in value by 21.7 per cent, according to Savills, potentially making this property £243,400