Pent up demand pushes house prices to break new record
By Laura Miller -
House prices rose sharply in August, sent higher by a surge of activity after months of lockdown to push the average cost of a property to a record £245,000.
Prices were 1.6 per cent higher than in July, and 5.2 per cent more than a year ago, making the strongest annual growth rate since late 2016, according to the Halifax House Price Index.
Tomer Aboody, director of property lender MT Finance, said the rebound is “from buyers who may have been sitting patiently waiting to move at the start of lockdown but by the end were pulling their hair out to trade up for more space, which has inevitably pushed up prices”.
He added many buyers have been leaving London for surrounding areas where their money is going further, “especially when you factor in the stamp duty incentive”.
At the start of July the chancellor announced buyers will be exempt from paying stamp duty on the first £500,000 of all property sales in England and Northern Ireland until next March, to boost the property market and help buyers struggling because of the coronavirus crisis.
Mortgage approvals returned to pre lockdown levels in July, with Bank of England figures showing the number of mortgages approved to finance house purchases was 66,281 during the month – a rise of 66 per cent from June and just 1 per cent below July 2019.
Market watchers warn the uptick in market activity may falter and require more stimulus once the government’s job retention scheme ends in October, however, when job losses are expected to rise sharply.
Anna Clare Harper, author of Strategic Property Investing, said: “Many in the industry feel this mini boom will be short-lived, given economic circumstances and forecasts.”
She added though that the fundamental drivers of housing demand are strong in an environment of low interest rates, low new-build rates and low inventory.
HMRC monthly property transactions data showed a rise in UK home sales in July at 70,710 – up by 14.5 per cent from June. The latest quarterly transactions (May-July 2020) were around 23 per cent lower than the preceding three months (February-April 2020).
Mark Harris, chief executive of mortgage broker SPF Private Clients, said demand for mortgages “continues to be strong as borrowers take advantage of some competitively-priced deals, particularly those with big deposits to put down”, but for first-time buyers the situation is trickier, with less choice of high loan-to-value products.
Guy Harrington, CEO of residential lender Glenhawk, warned the housing market can’t remain immune from the economic downturn indefinitely.
“As the government’s furlough scheme comes to an end along with the mortgage and stamp duty holidays, as well as the prospects of a no-deal Brexit, we could very well see the impact become evident later in the year or in 2021.”