Pandemic Pressure Sees UK Property Market Soar to Highest Levels in a Decade

House PricesThe stamp duty holiday and a desire for more space have seen the UK property market grow to heights not witnessed in years.

House prices have increased at their fastest rate in more than a decade, with official statistics revealing that average property values have increased by some £16,000 in the first half of 2021.

While that’s good news for the economy, it’s less positive for first-time buyers and those looking to upsize as they watch the average house price in England increase to £275,000 – an annual rise of 10.2%.

There was a similar percentage growth in Wales (11%), Scotland (10.6%) and, to a lesser extent, Northern Ireland (6%), although the picture is less clear on a region-by-region basis.

And capital dwellers will have noticed a trend for homeowners looking to escape from the big city and head to more suburban areas as working from home becomes the norm. London saw the lowest annual property price growth of any region in England.

Yorkshire and the Humber saw the fastest growth at 14%, with the North East (13.7%) and the North West (12.8%) fractionally behind.

The adjusted average property price in each region is:

  • London – £500,310
  • South East – £348,615
  • East – £315,059
  • South West – £287,650
  • West Midlands – £220,982
  • East Midlands – £219,950
  • Yorkshire/Humber – £188,575
  • North West – £185,726
  • North East – £145,893

The Race for Space

Detatched House in Countryside

A desire to move out of densely populated areas, and to purchase a home with a garden, have been key driving forces behind the property boom.

That interest was exacerbated by the stamp duty holiday, which saved buyers as much as £15,000 in tax when purchasing their new home.

However, that perceived saving was hampered by the increase in average prices, with high demand and static supply forcing values upwards.

Rightmove reported that Cornwall has, for the first time, overtaken London as the most searched for destination on their portal, while a survey from Nationwide found that two of the most common buying decisions now are for homes with a garden and within easy reach of the countryside or coast.

Nearly a quarter of respondents claimed that they wanted to get away from the ‘hustle and bustle’ of living in an urban area, and it’s not just the older generation seeking the good life – younger buyers are also interested in their own rural retreat.

Of course, where there’s demand there must be supply – those already living by the coast or in the heart of the countryside are seeing the biggest rise in the value of their home.

Are These Good Times for First-Time Buyers?

First Time Buyers

It really does depend if you are a glass half full or half empty person as to whether now is a good time to buy your first home or not.

Let’s start with the bad news. The cost of living is on the rise again, and one of the ways that can be halted is to increase interest rates – that makes borrowing money more expensive.

In that case, two things will happen if you take out a mortgage – you will have to repay back more in the long run, or you might not be able to borrow as much as you would like. Indeed, there is a worrying trend for first-time buyers ‘maxing out’ and risking defaulting on their mortgage….particularly alarming given the fragility of the jobs market.

You should never, ever borrow to your absolute financial limit – particularly when unemployment is expected to rise in the second half of 2021 as the furlough scheme ends.

But let’s have some good news too. There is a growing sense that the property market will dip later this year – current prices are ‘unsustainable’ according to a number of experts in the sector.

The managing director of Online Mortgage Advisor, Pete Mugleston, claimed that the government have created a ‘seller’s market’ – but that could change in the coming months. “The house price growth at its current level is unlikely to be sustainable in the long term, so as the UK takes further steps to getting back to normal, it’s likely that we will also see the industry stabilise and dip during the summer.”

There is a temptation for first-time buyers to buy now while the stamp duty holiday is in place – that comes to an end on June 30 – but let’s look at the numbers.

On a £250,000 property, you will save £5,000 in stamp duty charges – as of October 2021, you will be charged 2% up to that quarter of a million mark.

However, as we know the average property value has increased by £16,000 – so, if you buy now you’ll actually be £11,000 out of pocket when considering the various factors (this is for first-time buyers without a property to sell).