UK Housing Market Touched Peak – It’s Time to Return to Normal
The UK housing sector has been enjoying the boom lately, with average house prices rose by 13 percent in June 2021. The prices rose at the fastest pace in June, as buyers were in rush to complete the transaction before the stamp duty holiday winds down. Besides the temporary cut to stamp duty, a number of other factors played a significant role.
What does official data state?
According to the data fetched from the Office for National Statistics, the average house prices of an average home across the UK has increased by £31,000 over the past year from June 2020 to June 2021 and now the average house price stands at £266,000. The Land Registry data shows that house price inflation was recorded at 2% in June 2020 but the figures gradually increased in the last 12 months and touched 13% in June 2021.
What contributed to the rise?
Several factors influenced the average house prices over one year such as COVID-19 induced global pandemic led to the need for bigger homes, increased demand coupled with the supply, and the announcement by the chancellor, Rishi Sunak to waive off stamp duty charges on UK properties worth less than £500,000 contributed to the rise in house price inflation.
What is happening to the UK property market?
During the pandemic, the UK property market remained open, active, and on the rise, followed by official steps taken to keep the realty market on the go. The UK real estate experts opine that the sudden and sharp spike in the house price inflation from 9.8% in May 2021 to 13.2% in June 2021 is somehow associated with the looming deadline for the threshold for stamp duty to drop to £250,000 by the end of June – before its return to the pre-crisis level of £125,000 from October.
Therefore, to take maximum benefit from this stamp duty absence, every serious property buyer was in rush to complete the transaction. If we observe the recorded data, it is believed to be the biggest annual increase in house prices since November 2004.
What does the house prices trend show?
The uncertainty is a part and parcel of the coronavirus led pandemic, so it has negatively impacted the UK housing market, too. The property experts believe that the stamp duty holiday till October 2021 and continued uncertainty over what new coronavirus strain will bring means the house prices and inflation could continue to fluctuate in the foreseeable future.
The northwest English region is the hottest property market in the past year, where prices rose by 18.6%. On the contrary, the demand for bigger properties on the outskirts of London because it was the hardest-hit region of the UK by the repeated lockdowns – thus witnessed the meagre annual increase i.e. 6.3%.
Wales showed the biggest jump out of the four countries with the inflation related to house prices registered at 16.7% in the past year. The price of a home rose by 13.3% in England, 12% in Scotland, and 9% in Northern Ireland.
UK property market returning to normal
A class of real estate agents suggests that soon after the tax holiday is over, there will be a visible trough in the property sales pattern due to a slump in the demand from buyers as they have reached the maximum limit on house prices during the last year. Now, the sellers will have to cut property prices in order to find buyers.
It means that the UK property market will have to return to more regular trading patterns, following the highs and lows in the UK housing market caused by the lockdowns, steps taken by the government, and changes in space requirements. Once the stamp duty holiday will be completely over, we will start seeing the market returning to normal.
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