The latest official government house price data, released this morning by ONS, has revealed that property prices continue to rise, fuelled by pent-up demand and a desire for larger homes with more space.
According to the data, UK average house prices increased by 7.6% over the year to November 2020, up from 5.9% in October 2020, to stand at a record high of £250,000; this is the highest annual growth rate the UK has seen since June 2016.
Another house price milestone was also achieved during the month as London’s average house price surpassed £500,000 for the first time., adding a further blow to the capital's struggling first-time-buyers.
ONS say that price variations at the beginning of 2020 may reflect the unusual conditions in the housing market at the time.
People were advised not to move house during the tightest restrictions in April and May. As such, property transactions completed during that time may have been more concentrated than usual among those without complicating factors, such as a chain.
For example, first-time buyers – typically at the lower end of the price scale – may have been freer to complete transactions than former owner-occupiers, who may have had to co-ordinate multiple sales during lockdown.
Pent-up demand may have contributed towards an increase in house prices. The Bank of England’s Money and Credit November 2020 release reported that mortgage approvals for house purchases (an indicator of future lending) increased further in November 2020 to 105,000, the highest since August 2007.
ONS also said that the pandemic may have also caused house buyers to reassess their housing preferences: "In our UK HPI data, we have seen the average price of detached properties increase by 8.5% in the year to November, in comparison with flats and maisonettes increasing by 5.4% over the same period."
Anna Clare Harper, chief executive of asset manager SPI Capital, says: "The UK HPI data for November shows a more complete picture than other house price indices. This is important because news of house price growth both reflects and also influences buying decisions.
"In 2020, property decisions were underpinned by an understandable fear of missing out: on the temporary Stamp Duty reduction, on the chance to improve living conditions, and on future house price gains.
"This is reflected in the latest data. Specifically, house prices grew by 7.6% overall, led by Yorkshire and the Humber and London at 9.7% each. Within this, detached homes grew the most, by 8.5%, followed closely by terraced and then semi-detached properties.
"It’s important to point out that this growth was based on fewer transactions than in the previous year. Partly this was because fewer first-time buyers purchased their own homes, constrained by uncertainty in the jobs market, affordability constraints and a desire for flexibility.
"So what does this mean for the housing market? Firstly, rental demand is growing, because although fewer people are buying their own home, we all still need a roof over our heads. Secondly, for developers or homeowners planning to sell a property, it may be harder to find a buyer over the coming months, especially with the end of the temporary SDLT reduction looming.
"The good news going forward for property owners - whether investors or homeowners - is that property tends to hold its value well throughout market cycles, in particular, compared with the volatility of the stock market (which has experienced 7 x more ‘crashes’ than the housing market since the turn of the century, in 2000, 2001, 2007, 2008, 2011, 2016, 2020), or even racier choices such as cryptocurrencies, which experience such volatility on a daily basis."
Colby Short, founder and CEO of GetAgent.co.uk, commented: “If you’re currently considering a property purchase with the sole motivation of a stamp duty saving, prepare for disappointment.
"It is now highly unlikely that you will see a sale complete in time left and there remains a very long queue of hopeful homebuyers who have seen their purchase become stuck in the mud of an out of date legal process.
"While you can always roll the dice, it’s extremely important you don’t commit above and beyond your financial means and leave enough in the kitty to fully cover the cost of buying.”