One of the biggest surprises to unfold over the last year has been the massive boom in house prices. With so much uncertainty clouding so many aspects of our lives, the stability of house prices has provided a much-needed silver lining for some.
Let’s take a look at what’s going on with the price of good old bricks and mortar.
What’s happening with house prices in the UK?
House prices are going up – and they’re going up fast. According to research from Nationwide’s House Price Index, prices went up by 2.1% in the last month alone. It’s the highest monthly increase in 17 years!
It hasn’t just been a fluke or an unexpectedly good month either. Prices are up by 7.1% so far this year. Considering we’ve not even reached the summer, this is no modest climb.
Although the coronavirus pandemic has had plenty of unintended consequences, the ripple effect on property has been notable.
Why are property prices increasing?
There are a number of factors forming a perfect storm to push up house prices. The recent decision to extend the stamp duty holiday has only motivated buyers even more.
Sarah Coles, personal finance analyst at Hargreaves Lansdown explains: “The extension of the stamp duty holiday in March lit a fire under buyers. Unfortunately, it had less of an impact on sellers, who don’t feel they have long enough to go through the entire process of selling and buying before the end of June, so many of them are sitting this one out. It means estate agents are burning through their stock, and the market is red hot.
“Nationwide says that if house prices remained flat until June, comparisons to a dull summer last year would still mean double-digit growth. And given the forces at play in the market, it’s highly unlikely that prices are going anywhere but up in the immediate future.”
Will house prices drop in 2021?
The increase in demand for the limited number of houses that are for sale drives up the price. There may come a point where this squeeze runs out of steam. But the house price forecast for 2021 has flipped from negative to positive, and some predict that high prices will continue.
Sarah Coles recommends caution and a level-headed approach: “This kind of market can be very dangerous for buyers. It’s easy to start to panic about how fast properties are being snapped up and be sucked into bidding wars that leave you overpaying for the property.
“With unemployment expected to rise later in the year, when the furlough scheme draws to a close, the autumn and winter is much more uncertain. There are no guarantees that the market will continue its steep climb.
“If you’re buying at the moment, take some time to think things through. You can’t control the housing market, but you can control your own actions. You can make sure you don’t overstretch yourself, and be certain that you’ll still be happy with a purchase even once the market has cooled – even if your home falls in value for a while.
“It’s difficult to keep your cool when the market is this hot, but it’s the best way to ensure you don’t get burned.”
The stamp duty situation has brought forward a lot of house sales. This just means that people who may otherwise have bought later down the line are instead choosing to buy now. Although some fear a housing price bubble, many signs are still pointing towards prices reaching higher.
However, it’s important to remember that things could change quickly. Forecasts and predictions can flip at the drop of a hat.
Finally, always remember that buying a house is a big life decision that shouldn’t be rushed or influenced too much by outside factors. It’s worth keeping track of the overall market, but making decisions based on your own needs and circumstances is what’s important.
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