The UK government’s own figures declare it to be true – house prices rose to a record high in June. Even a national pandemic, it seems, can’t put the brakes on soaring house prices. 

According to the latest figures from the Office of National Statistics (ONS) House Price Index, the cost of the average home had jumped by 3.4% (an increase of around £8,000 compared to the same time last year), bringing the total price to £238,000 at the start of the summer. 

The figure is based on transactions which went through in March and April – at the height of the pandemic and when the country was already in lockdown. These were resumed in May when the English property market reopened – and which also resulted in a certain amount of pent-up demand.

East Midlands tops the table for property price rise

The biggest growth in house prices was in the East Midlands, which an increase of 4.6% year-on-year. Next was the North West with 4.4%. House owners in the South West saw the value of their homes rise by 4.3%, while in London Second Steppers (those going from a starter home to three or four-bedroom property) pushed up prices by 4.2% compared to 2019’s figures. Properties in the North East saw the lowest rise, according to the ONS statistics, at just 1.7%.

Not surprisingly, the government statistics also show that houses, rather than apartments, is the new buying trend post-Covid. This is, of course, home owners looking for more space, including greenery, in the event of further lockdowns. To the extent, the value of flats rose by 4.1% compared to just 0.9% for flats.

Number of sales more important than prices say analysts

June’s ONS House Price Index is the first published since the country went in to lockdown earlier this year. Although it shows prices are ‘up’ on the previous year, the number of sales which went through are down by 37% compared to 2019. And it is the number of sales – rather than the rising value of house prices – which is the greater indicator of how the market is performing, according to analysts. The Stamp Duty Holiday – where homes under £500,001 are exempt – will increase transactions over the next six months but that is due to come to an end in March 2020. 

The Stamp Duty holiday will, however, will keep sales more buoyant than normal as the government’s furlough scheme comes to an end, bringing the fear of job losses. The latter is expected to impinge negatively on price growth as prospective buyers wait and see what happens to the economy over the next six months or so. A potential No Deal Brexit also brings its own worries.

A survey by mortgage lender BSA found that 68% said they were put off buying a home because they were too worried about whether they would still have a job in the coming months. This compared to almost half that number (37%) last year during the ongoing Brexit negotiations, which in itself created a great deal of uncertainty.

UK house prices just keep on rising – but for how long? As more giant national employers announce job losses property analysts say it’s only a matter of time before the rush to buy begins to settle.

The caution is in response to the latest Halifax Monthly House Index figures which recorded the average property as 5.2% higher than the same period last year. This means the average house in the UK is now worth £245,000 in Halifax terms. And it’s not a far cry off Nationwide’s House Price Index either. The latter recorded a 2% jump between July and August, bringing the value of their average property to £224,123 (around £21,000 less). Halifax recorded that jump in house values between July and August as slightly less – at 1.6%.

In August property portal Zoopla revealed house sales in July were 76% above average over the past five years. Mortgage approvals had also quickly recovered too, according to the Bank of England.

The chancellor’s Stamp Duty holiday scheme, it seems, inflamed the already pent-up demand of lockdown. It means properties in England and Northern Ireland up to the value of £500,000 carry no stamp duty tag. That figure is halved for Scotland and Wales.

Property roller coaster predicted for Nov to April 2021

After the claustrophobia of having to stay indoors during March to May and an increase in home working, many buyers it appears are looking for larger houses with more bedrooms. Gardens and access to more green space remains a priority, while sales of coastal homes are also doing well.

Halifax MD Russell Galley is convinced the rise in property values will falter once government schemes propping up jobs finish at the end of October. At that point, he says, “downward pressure on prices” is expected.

Analysts predict brighter spring/summer 2021

Economic forecasters meanwhile expect that drop to be around 3% by the beginning of next year but then to pick up along with the general economy. That’s good news for the majority of house hunters, but not first-time buyers. They still feel frozen out thanks to the lack of available high loan-to-value deals around right now. But then, being priced out of the market won’t make any difference when it comes to house price values – hence the reason values continue to rise.

Those who can afford to buy have probably saved more during lockdown so can get a bigger home. Low mortgage rates are also helping. But they will have to be quick. Not only is the Stamp Duty scheme due to end in March 21, but properties right now are selling quicker too. Last year it was taking 39 days to sell a house; this year that figure has fallen to just 27 days. 

Winners and losers in annual house price values

Cities which were the biggest winners in terms of house price rises between 2020 and 2019 were Leicester and Edinburgh with 4.9% and 4.4% respectively. That’s according to the Zoopla guide. In third place was Manchester (3.6%), fourth Nottingham (3.2%) and fifth was Birmingham with 3.1% growth.

Cities where the average house prices have fallen compared to the previous year include Aberdeen (down a huge 3.9%), London and Cambridge (0.9% less) and Oxford with a drop in house values of 0.3%.

Mortgage approvals doubled between June and July, bringing the figure just 10% below February’s pre-lockdown numbers.

Latest figures from the Bank of England, show lenders gave the go-ahead for around 66,300 mortgages in July – compared to 39,900 the previous month. The figure for mortgage approvals in February this year was 73,700. By May it had dropped to a mere 9,300 – a record low since 1993 when the BoE first began collating the figures.

Unlike approvals, re-mortgage figure hasn’t jumped

The number of households re-mortgaging was similar month on month, at 36,000. This is almost a third lower than pre-lockdown.

Financially, gross mortgage lending was £17.4bn for July, compared to £16.3bn in June. That’s still short of February’s pre-lockdown levels of £23.7bn.

Figures for August even higher, say analysts

Property analysts believe August’s figures for mortgage approvals will be even higher, thanks to the Stamp Duty holiday which will cut an average of £4,500 from Stamp Duty bills. Those in the industry also point to furloughing of banking and other finance lending’ staff is resulting in a slowdown in the time taken for approvals to come through. Many believe the figures for August and September will reach February’s numbers very soon.

North London estate agent and former Royal Institution of Chartered Surveyors residential chairman Jeremy Leaf commented that the number of mortgage approvals did not reflect the stronger upsurge that the majority of surveyors noted across most property types and price ranges from the beginning of August.

Other analysts, however, are concerned about the effect the end of furloughing will have on the economy as a whole and the property market specifically.

Warning of lenders tightening their purse strings

Sam Harhat, Head of Finance at Andrews Property Group said lenders were becoming ever more stringent about lending, especially for high loan-to-value mortgages (those favoured by first-time buyers). This, he believed, would have a pretty deadening effect on the number of mortgage approvals for August.

He added: “The demand for property is exceptionally strong, a result of pent-up demand, the low cost of borrowing and the stamp duty holiday, while the availability of mortgage finance has been contracting by the day.”

Bigger houses selling one third faster than last year

It’s been clear over the past couple of months that rural retreats and suburbs are more popular than city centre living. But, property portal Zoopla claim they have also seen a 30% rise in the sale of four-and-five-bedroom homes since the easing of lockdown. That’s because people moving out of expensive city locations can afford bigger homes in quieter spots.

The website is also anticipating house prices to be 2 to 3% higher at the end of the year than they were at the beginning, thanks to “government support for the labour market and economy.”

Borrowing up in July – to above average levels

Meanwhile, Brits borrowed more money than they paid off in July – for the first time since April this year. At an additional £1.2bn it was slightly higher than the monthly average of £1.1bn for the past year and a half.