House prices in the UK have soared since the easing of the first lockdown. The boom in prices shows no signs of slowing down, with April 2021 seeing the highest monthly increase in average house prices, according to new data. Here’s why the UK housing market is booming and why the trend could continue for the next few months.
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What is happening to the UK housing market?
According to new data from the Nationwide building society, annual house price growth in the UK rebounded to 7.1% in April, up from 5.7% in March.
The stats show that month-on-month prices rose 2.1% in April, which is the biggest monthly rise since February 2004.
According to the BBC, this sharp increase has prompted some analysts to suggest that the UK housing market is ‘on the boil’.
The average UK home is now worth £238,831. That’s 15,916 more than it was worth a year ago.
What is causing the boom in housing prices?
Lockdown has caused many people to reassess their living arrangements with particular emphasis on extra rooms, space and gardens.
This has increased demand in the housing market. And since there are not nearly enough houses to match the demand, prices have shot up.
The stamp duty holiday has also played a role, albeit a smaller one, in house price growth. Some people are moving forward with their planned house moves in order to benefit from the tax break.
What does the future hold for the UK housing market?
According to the BBC, there is scope for annual house price growth to continue accelerating in the next few months as housing supply still does not match the demand.
And while many industry experts originally forecast that the UK housing market would decline in 2021 due to the end of the stamp duty holiday and the economic effects of the pandemic that would reduce affordability, many have revised their forecasts upwards.
The main house price forecast for 2021 now is that house prices will go up, with Knight Frank predicting a growth of 5% by the year’s end.
The revision comes in the wake of government support measures, anticipated relaxation of coronavirus restrictions and the successful roll-out of the Covid vaccine, all of which are expected to help mitigate any adverse effects of the pandemic.
What do changes in the housing market mean for buyers?
The continued rise in house prices is generally bad news for aspiring homeowners, especially first-time buyers.
However, many people have been able to save money during lockdown. And since a good number of first-time buyers usually get some help from their families when it comes to raising a deposit, it means that a lot of them might actually be in a good position to purchase a home even as prices rise.
There are several government schemes currently available to help first-time buyers get onto the property ladder.
Alongside these two, there are other options to help homebuyers.
This is available to people aged between 18 and 39. You can save up to £4,000 a year in your account to be used for buying a home. The government will top it up with a 25% bonus each year. So if you save the full £4,000, the government will top it up with an additional £1,000.
This is a scheme that lets you buy a 25% to 75% share of a property and then pay rent on the rest. You’ll have the option to buy a larger share later.
A proposed new policy that will provide homes to first-time buyers at a discount of 30% on the market value.
Taking advantage of these schemes could help reduce the initial costs of owning a home. However, it’s always best to remember that a home is a long-term investment and focus on getting the right home for your needs and financial circumstances, both now and in the future.
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