As predicted the number of mortgages increased in April as would-be buyers rushed to take advantage of the Stamp Duty Extension. 

Figures from the Bank of England’s latest quarterly report show that mortgage approvals increased to 86,900 (from 83,400 in March). It’s the first monthly increase in five months. In November 2020 lenders approved a huge 103,000 mortgages as buyers rushed to beat the original March deadline for the stamp duty holiday. The current extension is due to end on June 30 when the tax-free sum will fall to £250,000.

The April mortgage figures are around 20,000 approvals higher than the pre-pandemic period in March and April 2020. Nothing is expected to change, until the end of the year at least, thanks to the better than expected economic recovery for the UK, together with continued low interest rates. 

Average mortgage 12.3% higher 

In terms of value, the average mortgage approval in April this year was for £232,400. That is a 12.3% increase on last April’s figure of £206,900.

The Bank of England also reported that households continued to pay off overdrafts and credit card debt – although to a lesser degree than before now that lockdown was easing and restaurants and shops reopening.

Home owners are propelling the market

Data also shows that for the first time it’s people with equity who are propelling the market. There were 82% more second and third time buyers this time round than in the previous quarter in 2020. The mortgage completion figure for first time buyers has risen by 31% over the same period.

Banking industry group UK Finance said this reversed the pattern of the past decade when there were more first-time buyers with mortgage approvals. 

The impetus has been the desire for property with more space and gardens – something that second and third time buyers could afford, thanks to the growth in value of their existing properties. 

“The ongoing health crisis has brought with it a need for space during lockdowns which existing homeowners, supported by over a decade now of uninterrupted price growth increasing their housing equity stakes, have been well placed to respond to,” explained a spokesman for UK Finance.

South of England owners have most equity

The south of England – where house values have risen most in the UK over the past decade – had the highest number of home movers. In the south east the number of home mover mortgages increased by 110% during the first quarter year-on-year. In East Anglia the figure had increased by 91% and in London by 85%.

Around 60% of borrowers own at least half of their home, with 50% home owners in the South east owning £250,000 of equity. In London around 20% of home owners have equity valued at in excess of £500,000.

Figures also show that homeowners have been intent on moving further afield too. This corresponds with the desire to move to bigger properties in greener areas. If the working from home trend continues, then property analysts believe there will be a ‘broadening out’ of property values across the whole of the UK.

“A real life Theatre of the Absurd” was how one mortgage broker described the current state of the property market this week. At the same time, a colleague in the house hunting sector described the pace of the market during Spring as “off the chart.”

Both property professionals were speaking after revelations from the government’s Office of National Statistics – which measures data on actual properties sold – that property in England has increased by 10.2% year-on-year. 

With the average property now £275,000, the market has seen the highest increase since August 2007. That was just before the start of the last recession. In terms of property prices, the other nations of the UK are following suit, with Wales looking at 11% increases, Scotland 10.6% and Northern Ireland 6%.

Detached properties the big winners in price rises

In keeping with the desire for more space and gardens following recent lockdowns, detached properties are faring best, having jumped by 11.7%. Flats, on the other hand, had a more modest rise of just 5%.

Last week Rightmove’s Housing Index (which measures property asking prices) showed the average London apartment or house had increased by just 0.2%. And yet buyers are still paying £20,000 more there per average property than last year.

Jonathan Hopper, CEO of Garrington Property Finders pointed out that the economy has shrunk by 6.1% year-on-year during the first quarter – in huge contrast to the 10.2% house price rise over the same period. He blamed Brexit, the pandemic and the stamp duty holiday for creating a perfect storm. 

“Spring is traditionally a busy time for the property industry,” he said. “But this year has been off the chart.”

Economy is red, yet property market is green 

Andrew Montlake, of independent mortgage broker, Coreco, agreed: “The economy is deeper in the red than ever before and yet house prices are rising at an astronomical rate. It’s a real-life Theatre of the Absurd.”

Despite their comments on the ridiculousness of the property market, neither see it settling down for some time. 

Sarah Coles, of Hargreaves Lansdown, agreed. But she did add a cautionary note of her own. The last recession was sparked by irresponsible mortgage lending, she said, whereas the 1990 crash was down to high interest rates and unemployment. 

Furlough extension and vaccinations prove property saviours

This time round it was unemployment and the possibility of the furlough scheme ending before the economy was back up and running. But the furlough extension, economy re-opening and a successful vaccination programme has significantly cut that risk.

“The jury is out over though as to whether we’re going to get a similar blow to buyer confidence in the near future,” she added “… much depends on whether the Indian variant sets the economy back again this summer.”

Perhaps the surprising news concerning the super-paced UK property market is that the UK is not alone. House prices across the 37 advanced economies in the OECD grew faster in the first quarter of 2021 since back in 1990. In Australia they were the highest since the turn of the Millennium and American property growth was in double digits.

And as for the future? 

Most economists point to incomes being pretty constant – stable enough for people to feel good about going out and buying property. There was a restriction on what we could spent money on too so people have built up savings. 

Interest rates have also remained low, causing many in the industry to speculate that the property market can look forward to healthy growth until at least the end of the summer.

Property in London has seen the lowest annual price rise since 2013, according to the latest Rightmove report.

The same data produced by the property portal shows an annual increase in house values of 13% in Wales and 11% across the north west of England. In Yorkshire and the Humber the increase is 10.5%. But the rest of England is also experiencing reasonably high increases. To the extent, prices are up £5,767 even within the past month from March to April.

London records lowest annual rise since 2013

In London the rise year-on-year is a mere 0.2%. For the rest of the country the price of the average property is up by 6.7% since the start of the pandemic back in March 2020. This brings the figure to £333,564.

Stamp Duty Holiday in full swing

Chancellor Rishi Sunak’s Stamp Duty Holiday continues to have an impact on the market in England but the extension is due to end next month. After June 30 the tax-free break will fall to the first £250,000 of a property (rather than £500,000 at present). On October 1, rates will revert to the usual £125,000. First-time buyers though will not have to pay any Stamp Duty on the first £300,000 of a property from July 1.

In all, the government earns around £12bn every year in Stamp Duty, the HM Revenue and Customs (HMRC) figures show. It’s around 2% of the total tax collected by the Treasury. 

Hunt for green spaces goes on

Meanwhile, despite the smaller rise for London property, values there are still triple those of the standard home outside the capital.  The average property there is now priced at £640,373.

The poor rise in property values in London is believed to be spurred on by the pandemic with more people looking for greener spaces and larger properties from which to work from home.

Tim Bannister, Rightmove’s director of property data said many buyers were squeezing their way into higher price bands. This is in part due to the Stamp Duty Holiday but also the ability to save and not spend during the lengthy lockdown periods.

He added: “There appears to be more headroom in buyers’ budgets among those looking to upsize. Family homes with three bedrooms or more are like gold dust in many areas of the country, especially in parts of the north.”

No let-up in property prices this year

Interestingly, Bannister doesn’t see the end of the Stamp Duty Holiday having a huge effect on the property market and, as a consequence, property prices. Instead he sees the rush continuing to the end of the year and perhaps even beyond into 2022.

At the beginning of the pandemic it was southern and coastal areas that were benefitting from the desire to move from flats in the cities. Now, Bannister says, it’s the more rural areas of the north that are in favour. This is backed up by local estate agents, many of whom are noticing a high number of people from the south bidding for properties in regions such as Yorkshire and Lancashire. 

Property prices are continuing to soar, according to the latest Halifax House Price Index, released today.

Figures collected by the lender show the value of the average home in April is £20,000 more than the same period last year. It’s a rise of 1.4% – the fastest in five years – and takes the average selling price of a UK property to around £258,000.

The continuation of the Stamp Duty Holiday, buyers desperate for more space and the government’s new Mortgage Guarantee scheme are all contributing to the rocketing property market. So too is the fact many buyers have been able to save more during lockdown.

A spokesman at estate agent’s Fine & Country said: “The air is thin up here and, even though all buyers know in their hearts that things will calm down and growth will slow later this year, they are still frantically bidding up prices.”

Property selling within 24 hours

In fact, so competitive has the buying process become in Manchester that estate agents there say some properties are selling the same day they are listed. Other listings are receiving up to 20 offers within a few days. Some house sales are conducted via sealed bids. It’s not exceptional for properties in the suburbs to go £50,000 over the asking price either. 

Such is the desperation that some estate agents are reporting abuse from frantic buyers angry at missing out on viewings due to COVID-19 restrictions.

The North West as a whole is experiencing the fastest transaction rate in the UK, with seven from 10 of the biggest increases in house prices in areas of Greater Manchester, Lancashire and Cheshire, according to a recent survey by Rightmove. Houses in Salford have risen 44% in value within the past five years, from £129,563 to £188,600 in February.

Other evidence the property market in the UK is currently flourishing is HMRC figures for March which showed 191,000 properties selling – an increase of 32.2% from the previous month.

Then there is the Bank of England’s borrowing figures for March, which showed the biggest net increase in borrowing since records began back in 1993. The figure was a net £11.8 bn. A total of 82,735 mortgages were approved that month – a drop of 5,000 from February. The highest month for approvals was November, when 103,000 mortgages were given the green light.

Frantic pace to continue to autumn

The Chancellor’s Stamp Duty Holiday where buyers pay no tax on the first £500,000 of a property, will end in June. Then the tax-free amount will be cut to £250,000. In September the allowance reverts back to the usual £125,000.

That coincides with the end of the furlough scheme and what economists predict, will be many job losses. It’s only at this point that a slowdown in the property market is predicted. House prices though are expected to remain high, thanks to low interest rates and dwindling stock numbers (and which are already far lower than demand).

Despite this, a successful vaccination roll-out and loosening of lockdown restrictions much earlier than previously anticipated is also providing a boost to the economy.

Sales of homes in the UK has hit almost £150 billion since the start of the year. That’s twice the value of property sold for the same period last year. In fact, the figure equates to one in every 50 homes on the market changing hands between January 1 and April 15 this year. 

Property portal Zoopla revealed the statistics this week, showing the health of the market to date. And it looks certain to stay strong for some time yet, even with the end of the Stamp Duty Holiday looming, say property analysts.

Derth of four-bedroom and family homes

The figures also reflect the desire to move to a larger property, with a severely depleted number of three and four-bedroom family homes currently available. The numbers have actually hit a five-year low, according to Zoopla’s research, with most regions reporting a 20% drop in such larger properties.

They are particularly low in Scotland where there is a 58% drop year-on-year on four-bedroom properties. As far as England is concerned, it’s 44% in the South West and 42% in North West and 40% in the South East, says Zoopla.

And, in fact, the number of homes overall currently available on the market at the moment is 19% lower than in April 2020. It’s not just four-bedroom homes that are suffering either. Property experts believe the government’s recent introduction of 95% mortgages will also lead to a shortage of one-and two-bedroom properties for sale.

Possible future shortage of starter properties

Grainne Gilmore, head of research at Zoopla said: “More flexible working arrangements open up new opportunities for home owners to move to a further-flung location.

“At the same time, the rollout of the 95% mortgage guarantee will mean more demand from first-time buyers, fuelling demand without replenishing supply.”

Meanwhile a study into the effects of the Stamp Duty Holiday has prompted upmarket estate agency Knight Franks to suggest its ending won’t cause too much disruption to the market. That’s because it didn’t really have much effect on lower markets (ie under the £500,000 threshold), says the company’s head of research Tom Bill. He based his report on data from search portal OnTheMarket. 

He said: “With the holiday in place for nine months, buyers and sellers have increasingly factored in the need for price flexibility. All of which suggests the brakes will be dabbed rather than slammed on when the stamp duty holiday eventually ends.”

Glasgow has busiest property market in UK

At the moment those locations with bustling property markets include Glasgow, Bristol, Middlesbrough, Stoke and Nottingham.

The biggest property price increases have been found in Northern and Midlands cities, such as Manchester, Leeds, Liverpool, Nottingham and Leicester – all have more than 5% growth compared to April 2020.

Interestingly, there has been a short let-up in the carousel of property changing hands since the middle of April when lockdown ended in England. This is believed to be down to people catching up with family and friends first before then getting back to the business of property buying and selling.

The North of England continues to out-perform property anywhere else in the UK, according to data from both the government and major property portals. What’s more, it doesn’t look there will be any change for some time to come. 

The most recent figures from the HM Land Registry House Price Index showed property in the north-west has risen by 12%. In the north-east the rise was 8.9%, which is slightly less than Yorkshire and the Humber at 8.9%. Property in London rose 5.3% – this is despite the fact there was an exodus in the capital during lockdown as many city dwellers looked for property in the country. At the same time thousands of foreign nationals returned home due to both the pandemic and Brexit restrictions.

Zoopla recorded Manchester, Liverpool and Leeds as the cities with the highest growth in property values at 6.6%, 6.5% and 5.4% respectively. Of their top 10 performing cities, only one has an annual property price of more than £200,000. This means buyers in these cities will benefit from the Stamp Duty Holiday for longer. That’s because the tapering effect after June means buyers of properties valued at £250,000 or less still won’t have to pay any Stamp Duty.

Property sells faster in Wigan

The north-west reigns supreme for fastest selling properties too. According to data from Zoopla, a property in Wigan takes just 26 days to sell (from listing to sold subject to contract). Salford in Manchester together with Redditch near Birmingham, Knowsley in Lancashire, Sheffield and Medway in the south-east are all second equal with a record of 27 days to sell. Property in Liverpool takes 30 days to sell, in Manchester it’s 32 days and in Bristol property sales are concluded within an average of 33 days.

In Wigan the most popular category of property was detached three-beds in the £100,00 to £150,000 price category.

A Zoopla spokesman, said: “With lower property prices than Manchester and great transport links, it’s easy to see why houses in nearby Wigan and Salford are proving popular.

“The search for space is also playing a role, with the pandemic influencing what home hunters are searching for and a new importance placed on features like additional bedrooms and gardens.”

A forecast by upmarket estate agent Savills recently insists the north-west, together with Yorkshire and the Humber will remain the most buoyant areas for UK property for the next five years. They expect to see growth of 6% in both regions next year and 5.5% by 2023. In 2025 they predict that growth to be around 4.5% (with the north-west having gained slightly in 2024). What this means is that Savills predict house price growth in the north-west region to be 28.8% over the next five years and 28.2% in Yorkshire and the Humber. 

As a result of such growth, together with more regeneration taking place in the north of the country, it’s expected that the difference in property value between the north and south will start to gradually narrow over the first half of this decade.

We knew people were leaving their city pads – and London in particular – to head into the country last year as a result of coronavirus. We just weren’t exactly sure where they were heading. Until now, that is.

The results show that actually, many of them were heading to Cambridge, and the commuter town of Huntingdon in particular. Further north, Pontefract in West Yorkshire was also popular and so too was the Norfolk seaside town Great Yarmouth. 

Those were the top three locations (in order) for property purchased during 2020 in England and Wales according to government statistics and research carried out by specialist mortgage company Haysto.

Paul Coss, specialist mortgage broker at Haysto confirmed Covid-19 had altered the landscape when it came to UK property. 

He added: “I truly believe that when we come out of lockdown and the economy starts to bounce back, this could be a good year to move or get on the property ladder.”

Also hitting the high popularity spots were (also in order) Preston, Chichester, Chorley, Doncaster, Bury St Edmonds, Spalding and Bedford.

The top 10 table was based on the number of properties sold per 10,000 people. The numbers for Huntingdon, with a population of 26,000 people, was 400 properties per 10,000, Pontefract was 328 and Great Yarmouth, 320.

Cities losing out to countryside yearnings

Interestingly, all of the places featuring in the top 10 property popularity purchases – with the exception of Preston and Doncaster – all had populations of less than 100,000. Whereas bigger cities such as Birmingham, Manchester and Portsmouth saw demand for housing fall in comparison. 

The desire to move to more rural locations as a result of increased flexible working and a change of lifestyle, was also noted by popular property portal Rightmove last week. They announced that the most searched for location on its search engine in February was Cornwall, closely followed by Devon. In fact, searches for the village of Stithians near Truro was up 224% compared with last year, just before the pandemic in the UK. Other areas proving popular include the Isle of Skye, Norfolk and quiet villages in neighbouring East Sussex.

Exodus to country affecting commercial property

And it’s not only residential properties in further-flung locations that are proving popular – owners of commercial property have also witnessed a move from city to country. Office space company IWG had noted an additional one-fifth of queries concerned offices in country locations and as much as one-third for suburban offices. In contrast, demand for city offices had fallen by as more than one-tenth.

Whether this continues once lockdown is lifted remains to be seen. Although, new government legislation espousing flexible working is expected to be announced at some point later this year. The Bill, which makes flexible working the default position for companies, was announced in the Queens Speech in 2019. 

It’s believed this will include logging in from home and other forms of remote working. What it means in effect is that companies will have to come up with a good reason not to allow employees to work flexibly. And that can only mean more interest in property in quieter, countryside locations.