How is coronavirus affecting house prices?

The UK property market has been enjoying a mini boom of late, and the recent extension to the stamp duty holiday could see prices continue to rise in the coming months.

Here, Which? explains what’s happening to house prices and provides advice on making an offer on a property in these uncertain times.

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What’s happening to the property market?

Property markets in England, Scotland, Wales and Northern Ireland are open, meaning estate agents are conducting in-person house viewings and buyers are able to move home, despite the lockdown measures currently in place.

Since last July, the UK property market has been on the rise, largely fuelled by the government temporarily cutting stamp duty.

The breadth of the cuts vary from country-to-country, but they mean buyers could potentially save up to £15,000 in tax if they move before the deadline, which has now been extended in England, Northern Ireland and Wales.

Transaction numbers have risen significantly since the tax cut was announced.

Provisional data from HM Revenue and Customs (HMRC) shows that 121,640 sales went through in January, up 24% year-on-year.

Find out more: stamp duty holiday extended in Spring Budget

How have house prices changed?

We’re beginning to get a clearer picture of the impact coronavirus has had on house prices, but with the ongoing stamp duty holiday and continuing lockdown measures, the figures could continue to fluctuate.

The most reliable barometer of house prices is the Land Registry’s UK House Price Index, which is based on sold properties. It works on a two-month lag, so the latest available figures are for December.

The Land Registry says the price of a property in the UK increased by 1.2% month-on-month and 8.5% year-on-year in December, to reach £251,500.

Rightmove’s index is more up-to-date, but it’s based on asking prices rather than sold prices. In February’s report, it found average asking prices had risen by 0.5% month-on-month and 3% year-on-year.

Nationwide’s index (based on mortgage lending) reported a 0.7% monthly and 6.9% annual rise in prices in February. Halifax (also based on lending) reported a 0.1% monthly drop and 5.2% annual increase.

Find out more: should you pay attention to house price indices?

Property market predictions

There’s optimism around the property market at the moment, but there are signs that the rush has died down somewhat.

Research from Rightmove found the average time to agree a sale in January was 65 days, well down on the 76 days recorded a year earlier, but significantly longer than the record low of 49 days in October 2020.

Experts had predicted that house price growth could slow once the government’s coronavirus financial support schemes and the stamp duty cut come to an end, but their recent extensions have given pause for thought.

The estate agency Savills says it now believes house prices will rise by 4% this year, just three months after predicting that values would remain flat in 2021.

Lucian Cook of Savills says: ‘By extending both the stamp duty holiday and the furlough scheme in last week’s Budget, the Chancellor has significantly reduced the downside risks in the mid-year, while a recovering economy should support price growth towards the year end.’

The following predictions for 2021 were made before the stamp duty extension was announced:

Rightmove forecasts that house prices will rise by 4% this year. It predicts a lull once the stamp duty cut ends, but says this won’t be ‘make or break’.
Zoopla predicts annual house price growth will slowing to 1% by the end of 2021.
Halifax says house prices will fall by between 2% and 5% this year.
The estate agent Hamptons both believe house prices will stay the same in 2021. Chestertons predicts a 1.5% increase and Knight Frank a 1% rise.
The Centre for Economics and Business Research (CEBR) predicts house prices could fall by 5%.

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How will the stamp duty extension work?

As we mentioned earlier, transaction numbers and house prices have been rising since the start of the stamp duty holiday.

The tax break has now been extended in England, Northern Ireland and Wales, after claims that thousands of sales could fall through due to delays in the home moving process.

In England and Northern Ireland, the tax-free threshold of £500,000 will now remain until 30 June, a three-month extension to the original 31 March deadline.

Between 1 July and 30 September the threshold will be reduced to £250,000, before returning to £125,000 for home movers from October.

In Wales, the temporary tax threshold of £250,000 will remain until 30 June, while in Scotland the current tax break will end on 31 March as planned.

Find out more: stamp duty calculator – how much will you pay?

How do house viewings work at the minute?

During last year’s lockdown, estate agents began offering video house viewings, and these are continuing to play a part.

The government’s latest guidance says buyers should use virtual viewings to filter properties and only view homes in-person once they’re seriously considering making an offer.

In-person viewings must follow social distancing measures. You must wash or sanitise your hands when entering homes and avoid touching surfaces. If social distancing isn’t possible, both viewers and agents should consider wearing a face mask.

Find out more: should you buy or rent based on a video viewing?

Row of houses

Is it possible to get a good mortgage deal?

Since the COVID-19 pandemic began, the number of mortgage deals on the market has halved, but there are still plenty of good rates out there – especially if you have a bigger deposit.

Data from Moneyfacts shows that overall average rates have been on the rise in the last four months, but they still remain lower than pre-pandemic levels.

Buyers with deposits of 5% and 10% have been hardest hit by deals being withdrawn, though a host of banks have relaunched 90% mortgages in the last couple of months. 

Find out more: how can first-time buyers get a low-deposit mortgage?

Which? coronavirus advice

Experts from across Which? have been compiling the advice you need to stay safe, and to make sure you’re not left out of pocket.

Can you remortgage if you’ve been furloughed?
Your rights if an event is delayed or cancelled due to coronavirus
Coronavirus: how to protect your pensions and investments
What coronavirus means for your travel insurance
How to spot a coronavirus scam
Travel and consumer rights Q&A

Keep up to date on the latest coronavirus news and advice with Which?

This story was originally published in March 2020. It is regularly updated with the latest figures from various leading house price indices. The last update was on 10 March 2021.

Source: How is coronavirus affecting house prices?

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