COVID-19 has left many people feeling uncertain about the state of their personal and financial lives over the past couple of years. Almost every aspect of life has seen some sort of change and the housing market is no different.
Various trends in the property market can be attributed to the shockwaves from the pandemic, as well as the allowances that the government has made to try and combat the anxiety felt by the British public.
Whilst the disruption of the past few years is slowly settling down, it seems likely that the effects of coronavirus will linger across the nation into the future.
In this article, we’ll look at the impact of the coronavirus on the UK housing market, including the change in property prices and sale volumes.
How has the housing market been impacted by the coronavirus pandemic?
2020 was repeatedly referred to as ‘unprecedented times’ by the media and politicians, and the housing market suffered as a result. The COVID-19 pandemic saw house prices fall to the lowest that they have been since 2011 as the British public was uncertain about what the future might hold. Many people paused their plans to buy or sell properties, which caused the number of property sales to fall to a historic low.
However, the housing market quickly regained momentum once Coronavirus restrictions were eased and then lifted in the UK. The addition of incentives such as the Stamp Duty Holiday encouraged more people to move houses. This soon led to sales per month increasing and a boom in house prices that met and then exceeded pre-COVID levels.
The Stamp Duty holiday was introduced in July 2020 and ended in June 2021. It allowed buyers to purchase properties for less than £500,000 without having to pay Stamp Duty charges. Many buyers rushed to buy a house during this period so that they could save the extra bit of money. An increase in buyer demand also impacted house prices as the supply of properties was outweighed by the volume of buyers.
How have property prices changed since the COVID-19 pandemic?
The UK House Price Index states that the average price for all property types in March 2020 — at the beginning of the pandemic — was £232,684. There was a drop to £230,318 in the following month, but this was the only decrease in combined property prices during the height of the pandemic in 2020. In the following March, the average price for all property types had risen to £253,506, which further increased to £278,215 in March 2022.
Every property type saw a decrease in price from March 2020 to April 2020, when the concern about the pandemic first began to grow. However, the following months saw both decreases and increases in the average price for various property types. For example, the average price for a detached house experienced a drop from £351,884 in April 2020 to £351,884. Other property types saw an increase in this period, such as semi-detached houses, where the average price rose from £219,183 in April 2020 to £221,063 in May 2020.
June 2021 saw a price percentage change of 13.25% for all property types in the UK, which is the highest change in the past two years. In the same month, detached houses saw a price change of 15.02%, which is the highest change of any property type across the UK.
The South West has seen the highest annual price growth increase, with an average price rise of 14.1% in April 2022. This is an increase from the 10.5% growth rate in March 2022. London has seen the lowest annual price growth with the average residential property increasing by 7.9% in price over the year in April 2022. March 2022 had previously seen an average price change of just 4.9%.
However, despite London having the lowest annual price growth in the UK, the average house price in the capital still remains the highest in the country. Buyers could purchase a London property for an average of £530,000 in April 2022. In comparison, the North East had the lowest average house price of any region at £155,000 in the same month.
Why have house prices increased?
There are a number of reasons for property prices to change, such as the state of the economy and an increase in the number of people borrowing money to purchase properties. People tend to spend more on properties if they are confident about their financial status in the future. This tends to happen when individuals feel that they have job security and wages are high.
The amount that building societies and banks are willing to lend also means that more people can buy houses and pushes up buyer demand. Property prices will increase even further if there are more people wanting to buy properties than houses available to sell on the market. Buyers will likely increase the amount that they are willing to spend on a property in order to compete with other home buyers.
House prices have risen a significant amount in the past 40 years. The average house price in 1977 was around £10,000, whereas the average UK house price in April 2022 was just over £281,000. English properties have the highest average house price of £295,888. Welsh properties cost an average of £205,114, Scottish houses sell for an average of £180,822 and Northern Irish properties have the lowest average price at £159,151.
How have property sales volumes changed since the beginning of COVID-19?
English residential property sales increased by 20.5% between the year ending December 2020 and the year ending December 2021. By the end of 2021, 821,407 properties had been sold in England. Welsh property sales were recorded at 43,557 in the same period, which was an increase of 23.4%.
Detached house sales saw the lowest sales volume increase between the year ending December 2020 and the year ending December 2021. There was a 15.6% sales volume change in England and 21.1% in Wales.
However, this increase in property sales volumes did not continue into the following year. In February 2021, 82,420 properties were sold in England, whereas only 44,259 properties were sold in February 2022. 3,799 were sold in Wales during February 2021, but this decreased to 2,676 in the following February.
In February 2020, a month before the UK went into its first lockdown, the UK saw property sales volumes of 67,463. This rose to 96,081 in February 2021 but fell to 55,183 in February 2022.
The Stamp Duty holiday likely had a part to play in the high volume of property sales in February 2021, as did the public’s growing trust in the economy as the pandemic restrictions began to lift and life began to return to a more pre-COVID state. The increased housing demand for properties also led to house price appreciation, as fewer properties were available for the number of would-be home buyers and therefore restricted sale volumes.
What does the housing market look like in 2022?
Although house prices are still high in 2022, the latest review of the property market seems to suggest that the house price growth across the UK housing market is slowing down. The average property price in Northern Ireland stayed at £159,028 from July to September 2021. Prices only increased to £159,151 in October 2021 and stayed at that figure until February 2022.
Scottish and Welsh properties have seen average prices fall in the past year. The average price for a property in Wales during January 2022 was £206,469, which fell to £205,114 in the following month. Scottish house prices saw an even greater fall, with the average cost of properties dropping from £183,908 in January 2022 to £180,822 in February 2022.
English properties have broken the trend of the other areas in the UK as prices continue to rise. The average cost of a property in England during January 2022 was £293,277, which rose to £295,888 in February 2022.
Affordability constraints and an increase in properties for sale could further drive prices down in the remainder of 2022. The construction of new houses reached its highest figure in 20 years after nearly 50,000 new houses were built in the first three months of 2021. Property construction looks set to increase in England in the coming months as government interventions propose new schemes to further encourage the housing supply.
The House Price Index suggests that a typical home costs 7.1 times the average salary of a full-time worker. This is the highest price-to-earnings ratio that has been recorded since records began in 1983. A typical home in 2020 cost 6.1 times the average salary.
Andrew Asaam, mortgages director at Halifax, has previously stated that he suspects the trend will begin to change in the coming months: “With interest rates on the rise as a means of combatting inflation, it’s unlikely house prices will continue to grow at the pace we’ve seen recently. This should see the gap between average earnings and property prices narrowing over time.”
Is now a good time to buy a first home?
There are many low-deposit mortgages that are available, which could improve the chances of first-time buyers getting a home loan. However, whilst the price growth of properties in the UK has begun to slow, it’s unlikely that prices will fall in the long term.
The best time to buy a house is usually straight after the New Year, as property prices tend to be at their lowest in January and February. Sellers often decide to move home after the cold, dark days of winter, so there may be room for negotiation if the seller wants to move house quickly.
In an ideal world, the best time to buy a house is when there are lots of houses for sale and few competing buyers. When supply outweighs demand, prices tend to decrease because there isn’t competition to drive prices up. However, there’s no guarantee or way to predict that this will be the state of the residential market when first-time buyers are ready to buy their first property.
Summary
As with many other industries, the housing markets saw significant change as a result of the COVID-19 pandemic. Real estate prices have risen in the past few years due to increased demand and the rising number of people who are able to borrow money for their home loans.
The Stamp Duty holiday from July 2020 to June 2021 helped to increase the volume of sales as buyers were able to buy properties of up to £500,000 without paying Stamp Duty. This helped to jump-start the real estate markets as buyers were encouraged to purchase properties again after months of a global financial crisis.
Housing prices have begun to decrease in Northern Ireland, Scotland and Wales, but English property prices are still rising. The average house price in the whole of the UK in the first month of the pandemic was £232,684. However, the average house price increased by over £40,000 to reach £281,000 in April 2022.
