House prices surge in ‘strongest pace since 2004’ in property boom

House prices surge in ‘strongest pace since 2004’ in property boom

Halifax’s house price index, which was released today, reported another surge in UK house prices. The report said house prices in November were 1.2 percent higher then in October which added almost £3,000 to the value of the typical home in the UK. According to the report, house prices surged 3.8 percent higher between September and November compared to between June and August.

The average house price in the UK is now just over £253,000, which is a rise of more than £15,000 since June.

The new findings equate to a 6.5 percent rise since June which is the largest five-month gain recorded since 2004.

According to Russell Galley, Managing Director at Halifax said mortgage approvals are also experiencing a 13-year high with more people looking to move out of the city into more “rural locations”.

This is possibly due to more people looking to work from home in the future.

Currently, there is a stamp duty land tax (SDLT) holiday in place which means homes bought for under £500,000 are exempt from having to pay the tax.

The exemption will finish at the end of March, which some experts are predicting will cause a shift downwards in house prices.

READ MORE: House prices UK: ‘Prices climbing’ despite sales taking 12 days longer

Mr Galley pointed out other economic aspects that could have an effect on the housing market in 2021.

Mr Galley added: “It is interesting to note that the stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.

“The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year.

“However, the economic environment continues to look challenging. With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.”

The surge in house prices has not good news for all, as Olu Olufote, founder of the homeownership platform, RenterBuyer pointed out.

Mr Olufote explained that although this is good news for homeowners it is a “horror story” for first-time buyers looking to get onto the property ladder.

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He added: “The increase in prices has been fuelled in part by the stamp duty holiday and a flood of cash into the market due to the many covid relief grants and loans.

“This level of government-supported demand can only last so long and the inevitable impact of covid and Brexit will almost certainly be seen in the months to come.

“In the short-term, prospective homeowners will continue to face the double whammy impact of high house prices and low mortgage availability above 85 percent loan to value.

“The key factor in buying a new home, affordability, is proving elusive for far too many would-be homeowners and many will not be overly upset to see the property market come a cropper in 2021.”

David Westgate, Group Chief Executive at Andrews Property Group also mentioned Brexit as having a possible impact in the future.

As the deadline approaches for a post-Brexit trade deal to be put in place, some people are concerned that the UK could leave the EU without a deal in place at all.

Mr Westgate said: “House prices continue to rise but the market will have its work cut out in 2021 as the economic impact of the pandemic and potentially Brexit kicks in.

“The stamp duty holiday ignited already strong post-lockdown demand and this, coupled with the desire of many people to relocate away from major cities in search of outdoor space, has driven prices higher.

“House price growth will almost certainly moderate in the first quarter and values will come under pressure if unemployment starts to rise sharply as expected. The number of major high street firms collapsing suggests house prices are in for a tough 2021.

“At lower loan to values, we’re not expecting the market to grind to a halt but for first time buyers and anyone with a smaller deposit it’s going to be challenging next year.”

Nicky Stevenson, Managing Director at national estate agent group Fine & Country also voiced his concern over a no-deal Brexit and the looming stamp duty deadline.

Ms Stevenson explained there is pressure on transactions to be completed by the end of March.

With the average transaction time rising in 2020, even the smallest hiccup could derail a sale and push back completion until after the stamp duty holiday.

He added: “At times like this it’s important to remind ourselves that this index is based on mortgage approvals, not actual sale prices.

“Timetable pressure to complete before the stamp duty holiday closes at the end of March is mounting and many of the offers that underpin these numbers will not in fact take place.

“There’s still plenty of time before exchange for chains to suffer a misstep, pushing sales into April.

“This will force many of those who raised offers in haste to seal deals to scrutinise those valuations again.

“If the economic outlook and labour market deteriorate, with a no-deal Brexit still very much on the cards, this could prompt a larger proportion of buyers than usual to get cold feet and pull out. That’s where a big dent in this growth figure is likely to come from in reality.”

Published at Mon, 07 Dec 2020 10:05:00 +0000