Despite the COVID-19 pandemic (or perhaps because of it), house prices in the UK rose considerably in 2020. In fact, the rise of 8.5% on the previous year was the highest since 2014, and by December 2020, the average house price in the UK stood at £252,000.
Behind these figures are some interesting trends, both in terms of the types of properties people have been buying and the locations.
Were there any regional variations?
For once, London property has not done as well as elsewhere. Though properties in the English capital are still the most expensive in the UK, the increase in prices compared to 2019 was around 3.5% – which was less than half the national average and well under the whopping 11.5% price rises seen in the north west of England.
Among the four nations, house prices in Wales saw the biggest growth at 10.7%. England and Scotland saw broadly similar price increases of 8.5% and 8.4% respectively, and Northern Ireland was a bit further behind with rises of 5.3%.
Hove property preferences shifted?
In general, there has been much greater demand for houses than for flats – especially larger detached properties. Homes with gardens and other outdoor spaces have also become more desirable.
Related to this, city centre locations have seen much more modest price rises than elsewhere (and in some premium districts of central London, prices have even fallen). Suburban and country locations have become much more desirable – especially those places with decent transport links.
Rural and coastal properties have also seen a boost in demand, with many people deciding that the time is ripe to invest in a second home or a holiday rental.
What might have caused the price rises?
There are a few different factors behind the boom, several of which are connected to the coronavirus pandemic. Extended periods of time spent locked down within their own four walls led many people to think long and hard about what they wanted from a home. Those without outdoor space will have found things particularly hard, especially during the much stricter first lockdown where access to public spaces was severely restricted.
At the same time, huge numbers of people were suddenly on furlough or working from home, so the trade-off between getting more space but living further from an office that they weren’t going into anyway began to seem much more tempting.
Then, of course, there were financial factors. While many people have struggled financially during the pandemic, others have found themselves strangely better off. Foreign holidays, entertainment and going out have been off the menu for large stretches of the past year, while generous government grants have insulated many people from the economic hit – the combination of which has turned an estimated six million people into ‘accidental savers’. At the same time, terrible interest rates have made it almost pointless to keep spare cash sitting around in savings accounts but very cheap to borrow money for mortgages, and the chancellor’s temporary stamp duty holiday has been an added incentive to pull the trigger on house purchases.
What might the future hold?
Most experts are predicting a modest slowdown in house price growth. As the stamp duty holiday comes to an end, the rush to complete on property purchases should tail off, and as government support schemes begin to taper off and life starts to return to normal, it’s likely that many people will have less ready cash burning a hole in their pocket. Also, the housing market is self-regulating to some extent – it slows down when property prices simply get too high for people to afford, and December saw a distinct increase in rejected mortgage applications, suggesting perhaps that after a period of remarkable growth, house prices have finally started to outgrow people’s spending power.