• Damon Wiseman

Why are UK Property Prices on a High?

The average house price growth in the UK grew by 10.9% over the year to May 2021. This is the highest average house price growth the UK has seen since August 2007.

Anyone looking into purchasing property in the UK or anyone who is investing in the property market right now would tell you how prices have shot up and how quickly properties are being sold. This blog will look at factors around why this is happening in today’s market and what the near future might hold for property prices.

Demand & Supply

The most obvious reason for this price rise and a decrease in the days a property is on the market is related to basic demand and supply. Most estate agents in the UK are currently facing a shortage of housing stock. See the chart below of data collected by National Association of Enrolled Agents (NAEA), showing the average number of properties available per estate agency branch. Take note of this decline in stock with the all-time average low of 27 properties shown in April 2021.

NAEA Propertymark Housing Report 2021

This shortage of housing stock availability has left buyers with fewer options and an increase in appetite to move quicker in order to secure their dream home/ investment before someone else does. From first-hand experience, this has also led to a lot more offers going over asking price in desperation to secure the properties. See below data collected from Rightmove which shows the national average time to secure a buyer by number of days.

Rightmove- Average time to secure a buyer 2021

Factors Affecting Demand

Covid stap duty holiday

Government incentives such as the COVID stamp duty holiday which was implemented last year has helped fuel demand for home purchases in the UK. This suspends the transfer tax on a home up to £500,000. This stap duty holiday has been extended until June and is expected to taper off until September.

Interest Rates

UK Buy-to-Let mortgage rates have plunges to a fresh low this year. This coupled with rising rents across most of the UK has opened up opportunities for landlords. According to research by investment consultancy Knight Knox, more than a quarter of landlord’s plan to expand their portfolios over the next year. The same tendency is found in the residential market with first time buyers, where they are told they will have access to bargain mortgage rates this summer as the economy rebounds and lenders compete for customers.

COVID 19 – working from home restrictions

People being forced to work from home has led to a structural shift in demand for the kind of homes that buyers are now looking to acquire. These restrictions have aroused an interest in purchasing larger homes with a garden in the suburbs. According to property price data the average price of detached properties increased by 11.7% while flats and maisonettes only increased by 5% in the year to March 2021.

Future of House Prices in the UK

In the heat of the current market where properties are being snapped up like candy many people are questioning the thought of a crash and expecting house prices to decrease. However, in my opinion I don’t believe there will be a crash or a decrease in property prices for another year. I do however believe the house price growth will slow right down as housing stock begins to stabilize and the stamp duty holiday comes to an end. After speaking with a few knowledgeable estate agents, they explained to me how it can take months for the housing stock to reach normal levels. As long as the demand continues to outstrip supply at the rate it is at, we will continue to see this growth. More competitive mortgage rates and an economy on the rise is only going to feed the demand for houses.

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