ONS: The fastest rate of house price growth since 2007

Albeit slightly historic, the latest house price data published by HM Land Registry has revealed that average UK house prices increased by 10.2% over the year to March 2021, up from 9.2% in the year to February 2021 and at the fastest rate of growth since before the credit crunch.

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Property Reporter
19th May 2021
For Sale 313

This morning's data revealed that the latter half of 2020 saw the UK’s average house price growth accelerating, a trend that continued into the beginning of 2021, reaching an annual growth rate of 10.2% in March 2021.

ONS suggest that the pandemic may have caused house buyers to reassess their housing preferences. The UK HPI data highlights the average price of detached properties increased by 11.7% in the year to March 2021, in comparison with flats and maisonettes increasing by 5.0% over the same period.

Changes in the tax paid on housing transactions may have allowed sellers to request higher prices as the buyers’ overall costs are reduced. On 8 July 2020, the Chancellor of the Exchequer announced a suspension of the tax paid on property purchases with immediate effect in England and Northern Ireland. The suspension came into effect slightly later, on 15 July in Scotland and 27 July in Wales.

The figures also revealed that the average UK house price was £256,000 in March 2021 - £24,000 higher than in March 2020. On a non-seasonally adjusted basis, average house prices in the UK increased by 1.8% between February and March 2021, compared with an increase of 0.9% in the same period a year ago.

On a seasonally adjusted basis, average house prices in the UK increased by 2.1% between February and March 2021, following an increase of 0.8% in the previous month.

Anna Clare Harper, CEO of asset manager SPI Capital, comments: "10.2% house price growth in the 12 months to March would have seemed unbelievable this time last year. However, the rise and rise of house prices is something we have become accustomed to. The temporary stamp duty reduction; low-interest rates; lockdown-led upsizing/space-hunting and a flight to safer investments driving demand, set against constrained supply, have all helped push up prices.

"The effects are also clear: with wages rising significantly more slowly than house prices, affordability constraints are increasing. This is creating, and will continue to drive huge inequalities between older and younger generations, and growing demand from both younger and older renters who are ‘priced out’.

"What investors and homebuyers alike all want to know is, ‘what next?’ Many fear a housing market ‘bust’ following the boom we have seen over the last year.

"But unlike the rapid rises and falls of cryptocurrencies (an indirect comparable, but one that is relevant as an alternative use of capital, and particularly interesting at the moment), housing holds a fundamental value, since we all need a roof over our heads.

"It is also getting more expensive to build. With construction costs rising due to raw material costs, and regulations around building standards getting tighter, it is easy to see how house price rises will continue over the coming years, in particular for new homes. The UK housing market of the future will no longer be dominated by the high value of land but by the challenges and costs of building new homes that meet the needs of a net carbon zero economy, in a context of rapidly rising costs to deliver."

Gareth Lewis, commercial director of property lender MT Finance, says: "The overwhelming evidence is that consumers are still willing to spend money on property so they must have enough security around their job and be encouraged by the wider economy to give them the confidence to do so. As this is one of the biggest transactional purchases you are ever likely to make, this confidence in the market is hugely positive. As we recover from the pandemic, we need people to spend money, whether on property, in shops or restaurants and pubs.

"However, with property prices continuing to increase, those trying to get on the ladder are going to struggle. Has the Bank of Mum and Dad taken a dent through Covid and will there be less money available to help fund deposits? 95% mortgages are more widely available but still very limited in terms of restrictions. We need the next generation of homeowners not only to want to buy but be able to and the government has a responsibility to make property more affordable, in some way, shape or form."

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