House prices grew by the biggest monthly margin in June since 2007, new figures show. 

The Rightmove survey – which calculates on the basis of asking prices rather than actual selling price – reported a 0.7% jump between June 13 and July 10. This will have been accelerated by buying trying to benefit from the higher Stamp Duty holiday rate benefits. Since July 1 the tax-free figure now sits at £250 (rather than £500) until the end of September.

Asking prices ‘up’ 6.7% over last six months

The property asking price figure has actually increased by 6.7% within the past six months on the Rightmove portal. Government figures from the Office of National Statistics based on completed transactions, showed house prices had risen by 10% between May 2020 and the same period this year. That brought the cost of the average UK home to £255,000 (a jump of £23,000 within a year).

The most popular type of home has been terraced houses. In Wales, these rose in price by 15.2% and in England by 11.2%. Detached homes were the next most popular property in Wales and England, with price rises of 14% and 11% respectively.

North West property is biggest winner

Of course, the prices haven’t been across the board. Prices went up most in the North West (15%). London house valuations have suffered most, with the lowest annual increase of 5.2%). The main reason for this is the pandemic incentivizing more people to move to more rural areas. 

But a shortage of supply is also to blame for escalating house prices, say the Royal Institution of Chartered Surveyors (RICS). And they think this will continue to send prices soaring upwards over the next 12 months.

As far as moving out of cities is concerned though, some of the biggest winners when it comes to house prices have been villages and small commuter towns outside the capital.

Property ‘earning’ more than the average annual salary

In Hastings, Sussex, for instance they have increased so much that 62% of properties there increased more than the average salary this year, according to property portal Zoopla. In the South West, nearly one third of all homes have risen in value more than the house owner earns in a year. In the South East the figure is 28%.

In fact, the Zoopla study shows that one fifth of property in the UK earns more than the average salary (of £30,500).

Mortgage rates become more competitive

As a result, mortgage interest rates have gone down recently. Two high street lenders – TSB and Halifax – are offering two-year fixed interest rate deals of less than 1%. These do however, come with big deposit demands of 40%. 

Both 0.94% fixed rate deals have fees of just under £1000 and are only available for those looking to re-mortgage and those with equity have to pay higher rates.

Mortgage brokers admit the deals are good but that there are better ones on the table – especially those at higher rates but with no fee.

Commercial property investors and landlords are repositioning their portfolios by selling up retail and office space and opting for student campuses and warehousing instead. 

Global investment firm Blackstone are just one of many companies who have gone down this route in recent months, seeing how the pandemic has altered the commercial and residential property outlook. In terms of the latter, city housing is being spurned in favour of villages and greener spaces or coastal retreats. In commercial property terms, it’s all about students – both in terms of accommodation and research & development facilities in particular (ie high-tech life sciences campuses). Warehouses are also faring well with the increase in logistics companies.

As one analyst put it, commercial property interests have switched from retail to “beds, meds and sheds” — residential housing, healthcare and life science property and warehouses.

That’s because, in 2010, retail outlets and offices made up 70% of commercial property sales. Today it’s only around 35%, according to Real Capital Analytics.

‘Golden triangle of Oxford, Cambridge and London’

Earlier this year a 40% stake in Magdalen College’s Oxford Science Park was offered at £100 million – more than five times what the College paid five years ago. The ‘sweet spot’ according to investors in the ‘golden triangle’ between Oxford, Cambridge and London. Around £2.4bn was invested in life sciences property there last year and there’s still room for growth say analysts. Most big investors want to get in from the off though, saying the big money is in building new campuses and labs.

Warehouse shares up 16% post-pandemic

An increase in online shopping – particular during the pandemic – has led to a huge demand for warehouse space by distribution companies.  Warehouse developer Segro shares went up 16% recently. Office supplier British Land and Land Securities have lost around 30% of their share price since the pandemic, while shares for shopping centre supremo Hammerson are down by 75%.

Buy to let landlords ‘growing in confidence’

The sector may have been hit by a raft of tough legislation in recent years, but the buy to let market is still strong. And it’s going from strength to strength, if the last quarterly report by the National Residential Landlord Association’s quarterly Landlord Confidence Index is anything to go by.

This is backed up by a report commissioned by The Deposit Protection Service which found that more than one third (34%) of existing UK landlords had – or were about to – increase their property portfolio. All said they were encouraged by recent price growth. 

House values increase 20% in five years

Records by the Office for National Statistics show the value of the average house in the UK has grown by more than 20% over the past five years (from June 2016 to March 2021). That’s from £212,887 to £256,405. In 1991, the average UK house value was just £57,000.

The rental market too is flourishing, with a 4% increase year on year in May this year, according to the Homelet Rental Index. That’s an average rent in the UK of £997 pcm.

It’s been a long-time coming – although it’s still too soon for many potential house buyers – but Rishi Sunak’s bumper stamp duty holiday extension is to end on Wednesday, June 30.

The tax-free threshold will then halve from £500,000 to £250,000 for three months, before returning to its normal £125,000 at the start of October. 

The forthcoming deadline has rocketed the property market, and which itself has been flourishing since the Chancellor first made his tax-free incentive announcement in the summer of 2020. At the time the UK was in the grip of the pandemic.

Average house increased £22,000 in a year

The latest report from the government’s Office of National Statistics, the average house price had increased by 8.9% from April 2020 to 2021. According to the Halifax figures, that’s worth around £22,000.

Some property analysts are predicting a crash when the Stamp Duty holiday finally peters out; others say the market is resilient enough and that there will be a slowdown in sales but no ‘big bang.’ That’s because demand is high and the UK is still in a housing crisis where there just isn’t enough homes to go round. This means supply is hardly likely to increase.

At the same time the hunt for ‘greener pastures’ is still a priority for many second-stepping city dwellers. First-time buyers have had the chance to save for a deposit during lockdown, increasing demand in that sector too.

Calls to abolish Stamp Duty completely

Despite this, many government economic advisors, as well as those within the property industry, are calling for the Stamp Duty to be scrapped completely.

 Julian Jessop, of the Institute of Economic Affairs said: “The constant tinkering with stamp duty is distorting the property market, leading to big swings both in house prices and in the number of transactions.

“Most economists agree stamp duty is a particularly damaging tax and it would be better to scrap it completely.”

His call was echoed by John O’Connell, chief executive of the TaxPayers’ Alliance who said: “Stamp duty is a terrible tax and the temporary cut has been a boon to many Britons.”

Sunak, meanwhile, has remained quiet on the matter. 

Stamp Duty: from late 1950s to today

The Stamp Duty Land Tax was introduced in the late 1950s at 1% over house prices of £30,000. Considering the average house at that time cost only £20,000, Stamp Duty wasn’t much of an issue for many home buyers.

In the mid-1990s the threshold doubled to £60,000 but calculating the tax became far more complicated, as new sub-thresholds were introduced. By 2000 there were four thresholds, with the highest paying 4%.

Today, it’s not unusual to pay £150,000 Stamp Duty on a home valued at more than £1m, thanks to the fact London homes over £937,000 come with a hefty 10% price tag.

As a result, the tax is viewed as a revenue winner by government. Were it to be abolished, they may be hard-pressed to find a similarly lucrative income stream.

House prices have fallen by 1.9% since March this year.

But official figures from the UK House Price Index for April also show an annual increase of 8.9%. That brings the cost of the average property in the UK to £250,772.

The government property figures – which are compiled by the Office of National Statistics – are calculated on the basis of actual house sale transactions which have gone through. Other Indices measure asking prices or valuations based on mortgage offers so are not quite the same realistic gauge of the property market at the time.

“The slight loss of momentum in the housing market in April reflects the fact that house prices had been inflated in March as buyers rushed to purchase a property before the original end date of the temporary increase in stamp duty to £500K,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

The fact that in Scotland the Stamp Duty threshold reverted to its normal rates in March and house prices fell 4.1%, makes analysts believe a similar scenario will occur in England and Wales in the autumn.

North East sees highest growth

In England the North East pays witness to the biggest annual rise in property values with growth of 16.9%. The average house or apartment there is now valued at £144,032. Property in London has seen the lowest increase, at just 3.3%. It means the average property in the capital is now valued at £491,687.

Wales too has experienced large house price growth, with an annual rise of 15.6%. That brings the cost of the average property there to £185,041.

Semi-detached homes grow most in value

The cost of semi-detached properties increased most in England, with a 10.3% rise. That brought the cost of the typical semi-detached house to £255,589. Terraced houses rose by 9.7% to £219,577. Detached homes were up 9.4% in value to £412,888, while the increase for flats was less than half of semi-detached homes, at 4.7%. The average flat in England, now costing around £230,172.

The average cost of a first-time buyer property is £224,786 – an increase of 9% over the past 12 months. New Build properties have gone up by 10.8% to £333,823.

London sees almost non-existent growth in flats

In London semi-detached homes were also the biggest riser, with an increase of 7% to £626,412. The value of flats rose least, with just a 0.6% increase, making the cost of the average flat in the capital £415,006.

A similar pattern developed in Wales, with semi-detached homes experiencing the biggest price growth (16.8% to £181,164). Flats saw the lowest rise here too, with 12.3% to £124,317.

Repossessions start post-lockdown

There were 138 house repossessions in England in February this year. The highest number – 30 was in the North West. Next highest was the North East with 23 and third was the South East with 20. There were 18 house repossessions in London. Wales had nine.

Data for the UK House Price Index comes from HM Land Registry, Registers of Scotland, Land & Property Services/Northern Ireland Statistics and Research Agency and the Valuation Office Agency.

It is not just sellers, canny savers and surveyors who are benefitting from today’s fast-paced property market, it seems.

Property selling website On The Market this week announced its first profit in six years. Started by a group of estate agents, the portal made a pre-tax profit of £1.1m in the year to January 2021. That compares to a loss of £11.7m for the previous 12 months.

The profit was despite the company offering customer discounts totalling £2.6m during lockdown. 

The hunt for more rural locations together with a desire for larger properties is also driving traffic to the site. In fact, visits to the website increased by 13% to 267m during 2020. 

Increase in New Builds helping boost web traffic

Financial assistance from the stamp duty holiday and new government discounts for first time buyers is also boosting profits. So too is additional New Build listings from developers such as Barratt and Crest Nicholson. At the end of January this year the website had 12,687 property advertisers.

Estate agents behind the website – formed as a challenge to the monopoly of Rightmove and Zoopla – include Savills, Strutt & Parker, Chesterton’s, Knight Frank and two smaller London businesses.

Jason Tebb, chief executive of the company running On The Market said he was confident of ongoing success, particularly now that many homeowners were happy to allow physical visits to take place.

“The economic fundamentals still remain. There’s a low cost of borrowing and huge pent-up demand still, and very few properties on the market comparatively,” he said.

Housing inequality growing says BoE 

Meanwhile housing inequality – particularly between the young and older generations – is at risk of escalating even further, BoE figures show this week. Bank of England chief economist Andy Haldane blames the stamp duty holiday for stoking the flames of the market to the extent house prices were up more than 10% in most UK regions compared to the same time last year.

Earlier this week mortgage lender Halifax recorded house prices as having increased by 1.3% in May, taking the average selling price per property to £261,743. And analysts at the Halifax don’t see any let up in the near future either.

Calling for more homes to be built to help with supply problems Haldane added: “For most people the global financial crisis came like an earthquake exposing those structural fault lines in our societies, of which inequality is among the largest.”

Housing supply and demand gap similar to 2013

Figures from the latest survey by Royal Institution of Chartered Surveyors (Rics) show the largest gap between house supply and demand since 2013.

As prices continued to increase, demand too went up last month. This is mostly due to buyers trying to beat the deadline for the phasing out of the Stamp Duty holiday. In fact, one analyst this week described the rush to buy as “the biggest conveyancing logjam we’ve ever recorded in a decade.”

But the number of properties available are becoming increasingly scarce, according to a spokesman for Rics. Despite this, he predicts more properties for sale will start appearing on listings in July and August.

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.