The latest House Price Index published on GOV.UK by HM Land Registry looks at data for December 2020. The main highlights include:
UK average house prices increased by 8.5% over the year to December 2020
Average house prices increased over the year in England to £269,000 (8.5%), in Wales to £184,000 (10.7%), in Scotland to £163,000 (8.4%), and in Northern Ireland to £148,000 (5.3%)
The North West was the English region to see the highest annual growth in average house prices (11.2%), while London saw the lowest (3.5%)
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, comments: “This confirms that 2020 was the year that fundamentals came home to roost. There was no escaping a lack of space for households who suddenly found they were living on top of each other with little respite. That has powered annual growth that reached a six-year high.
“Markets don’t move in straight lines and there’s no doubt there will be fresh challenges this year but there’s still too much pessimism around. One aspect being routinely ignored is the amount that Britons have saved during the past 12 months and the effect that will have in the real economy.
“The Bank of England’s Andy Haldane revealed this month that he expects ‘accidental savings’ to have reached £250bn by June. This won’t just make itself felt on the high street and in our travel agents. It is set to be an instrumental supporting factor for house prices this year.
“To put it in context, £250bn would fund the maximum stamp duty tax break of £15,000 on over 16.7million sales, which would be enough to cover every purchase in the UK for over 15 years. If the Chancellor does end the scheme as planned at the end of next month, it’s not necessarily all over for healthy house price growth even if some sales do fall through.”
Adnan Shah, founder of ethical real estate investment manager Buraq London, comments: “Festive celebrations had been put on hold in December, but it seems no one told the housing market, which saw prices soar higher than New Year’s Eve fireworks.
“In hindsight, there were hints of an overheating market, with the monthly mortgage approvals cooling 103,400 in December, down slightly from 105,300 in November.
“Much of the slowdown in January had been due to buyers’ fears over the stamp duty holiday ending, but the growing optimism about an extension should see house prices blossom through the spring.”
The latest House Price Index from Halifax shows a slight decrease in house prices during January 2021.
The highlights from Halifax’s report include:
House prices in January were 0.3% lower than in December
House prices were 1.6% higher in the quarter of November to January than in the previous quarter of August to October
House prices were 5.4% higher than in January 2020
Russell Galley, Managing Director, Halifax, comments within the report: “The average UK house price slipped by -0.3% in January, the biggest monthly fall since April last year. Whilst this pushed the typical property value down to its lowest level since October, at just under £252,000, prices are around £13,000 higher than a year ago.
“There are some early signs that the upturn in the housing market could be running out of steam, with the annual rate of house price inflation cooling to its lowest level since August. Industry figures for agreed sales remain well above pre-pandemic levels but new instructions to sell have decreased noticeably, and total stock held by estate agents has risen to its highest level since before the EU referendum in 2016.
“The Stamp Duty holiday has undoubtedly helped to fuel growing demand amongst households for larger properties. However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.
“How far and how deep any slowdown proves to be is a challenge to predict given the prevailing uncertainty created by the pandemic. With swathes of the economy still shuttered, and joblessness continuing to edge higher, on the surface this points to slower market activity and downward price pressures in the near-term.
“That said, we saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.”
Halifax House Price Index shows house prices beginning to drop in January
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, comments: “The lockdown is playing its part in keeping prices as high as they are because it has reduced supply, fuelling greater competition among buyers for what is available.
“The Budget is only around the corner now and, while it remains to be seen whether the Chancellor will extend the stamp duty tax break, he has a big deficit and many other levers to pull that could affect the market in much more significant ways.
“Politicians are used to hearing people cry foul when handouts end. Treasury minister Jesse Norman told a Parliamentary debate earlier this week that the stamp duty holiday has done its job. Therefore the focus could quite quickly shift to other issues, such as capital gains tax.
“The stamp duty holiday has now faded as a force behind agreed sale prices, though some buyers with smaller chains are still hoping to complete before the deadline.”
Lucy Pendleton, property expert at independent estate agents James Pendleton, comments: “This is as muted a response to the faded hopes of a stamp duty tax break that sellers could hope to see.
“We were being led to believe we’d have to put our heads in our hands in January and brace for impact because of the end of the stamp duty relief but the market’s mechanics pointed to a different result all along.
“Rents have fallen, putting negative pressure on prices and first-time buyers won’t pay stamp duty on purchases up to £300,000 once the scheme ends anyway, just as they did before. For almost everyone else, apart from those at the top of the chain, the lost relief can be clawed back by renegotiating if necessary.
“It is sellers, not buyers, who are a little quieter at the moment. A lot of people with children have decided against listing their property for sale while they’re homeschooling and their home looks like a bomb has hit it. There are still plenty of first-time buyers looking and we’re just five weeks away from when people’s gardens start to look better and we always see a rush of activity after spring has sprung,
“The fact the Chancellor hasn’t ruled an extension to the stamp duty holiday either in or out is helping to create another wait-and-see period for both vendors and buyers. However, properties are still getting a very high level of engagement online. This is always good news and will manifest itself when we have a bit more clarity after the Budget. People are still dreaming of moving to larger properties, and one home we listed recently at nearly £4m received 8,000 views in 14 days. Most of these buyers would not be able to stretch that far but it tells us that the appetite is still there and will be reflected in activity over the summer.
“The bellwether London market has peaked for now and the shift in behaviour of landlords last month is evidence of that. Many landlords decided they would cash in on record prices late last year but were asking too much for homes that weren’t in great condition. Since mid-January, a significant number of them have now given up trying to sell and, having got tenants out, are now trying to let them again. Their gamble hasn’t paid off and this is weighing on supply even further.”
Adnan Shah, founder of ethical real estate investment manager Buraq London, comments: “The modest falls in prices we’re seeing can be blamed on the impending end of the stamp duty holiday, and the chances of an extension are dwindling by the day.
“There have been two significant jumps in residential prices since the general election. First the Boris bounce, and then a post-COVID rally caused by pent-up demand and people rethinking their living situations.
“This isn’t a market that needs puffing up any more. The threat of valuations becoming detached from reality should concern buyers, landlords and investors alike.
“However, the vaccine rollout is proceeding better than expected, and if the engines of the economy are firing on all cylinders by the summer, the benefits could keep the housing market purring in the coming months.”
Nationwide’s January House Price Index also reports a slowdown in house price growth.
The January 2021 Nationwide House Price Index shows that annual house price growth has slowed for the first time in six months. This slowdown has occurred just as the end of the Stamp Duty holiday approaches.
Annual house price growth has slowed to 6.4% from 7.3% in December
Prices are down 0.3% month-on-month, after taking account of seasonal factors
Homeownership has increased for the third year running
Within the report, Robert Gardner, Nationwide’s Chief Economist, said: “To a large extent, the slowdown probably reflects a tapering of demand ahead of the end of the Stamp Duty holiday, which prompted many people considering a house move to bring forward their purchase. While the Stamp Duty Holiday is not due to expire until the end of March, activity would be expected to weaken well before that, given that the purchase process typically takes several months (note that our house price index is based on data at the mortgage approval stage).”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, has commented on the index results: “A predicted collapse in house price growth has failed to materialise. This was supposed to be the month that legions of buyers effectively threw in the towel and moderated their offers having been forced to remove the Stamp Duty tax break from the equation.
“Yet, despite everything, this market is still clinging firmly to strong annual price increases and this is further evidence that, while the Stamp Duty tax break was a catalyst for the mini-boom, it’s not the main motivator pouring fuel on this fire.
“This isn’t really that surprising. By the end of last year, the market’s gains had already eroded the tax benefit of the Chancellor’s scheme, which already suggested there was more going on. Those who benefit least are also those more likely to be older, with families and most in need of more space. These households are also more likely to have the money to make that move happen. They are responsible for the narrative that has characterised the past nine months.
“Continued talk of negative interest rates isn’t doing anything to cool demand for mortgages either and the housing market could still have a few more surprises up its sleeve this year.”
Lucy Pendleton, property expert at independent estate agents James Pendleton, comments: “Forget the mild monthly price decline, this is hardly the performance of a market in peril. The fact that most buyers agreeing purchases now will almost certainly miss out on Stamp Duty relief has barely moved the needle so there are wider factors at work here and chances are they’ve been cooking up a storm all along.
“Just look at what this market has weathered. After a year in which it has faced a stubborn pandemic, associated economic chaos and tightening borrowing criteria for first-time buyers, it has still surged beyond anyone’s expectations. Even in London, which can swing earlier and further than other regions, the pendulum is showing a reluctance to swing to the other extreme. Achieved sales prices have softened but it hasn’t been enough to send badly squeezed first-time buyers stampeding back to estate agents’ windows.
“Expect low-interest rates and vaccine optimism to continue to play a commanding role in what happens over the next few months, as all eyes turn to unemployment and the end of the furlough scheme. Those buyers who are confident in their income, however, will continue to make that felt and there are still plenty of them around.”
Adnan Shah, founder of ethical real estate investment manager Buraq London, comments: “A slight nudge southwards is a positive start to a year that had a lacklustre future written for it. January was arguably the sternest test of the residential market since the pandemic began.
“The initial shutdown last year stemmed a lot of panic, whereas last month’s statistics demonstrate that the residential market is actually much more willing to shrug off the sort of temporary economics that reach our ears daily than people give it credit for.”
