How is the pandemic affecting house prices?

How is the pandemic affecting house prices?

author: Sarah Neate

By Sarah Neate


During summer 2020, the housing market experienced a surprising boost. However, now we’ve entered into a third lockdown, it’s difficult to know whether buying a home is a good idea.

What’s been happening in the property market? 

Last year, the government cut stamp duty in order to prevent the housing market from collapsingAnd effectively, the tactic worked. Lots of people took advantage of this offer because it meant that they could save around £10,000 in stamp duty. However, while stamp duty was cut, property prices increased over the course of 2020.  

According to the UK House Price index, prices have continued to climb from January 2020 through to November 2020Between these dates, there’s been a 7.6% increase in the average house price. However, because of a data lag, there's no data to show how prices have been affected following November.  

While the stamp duty holiday was a relief for many, it didn’t mean everybody was able to take advantage5% mortgages disappeared from the market during this time, and most lenders were looking for a 15% deposit. The economic impacts of COVID meant lenders where less confident when it came to mortgages. 10% deposits became increasingly difficult to come by. 

In turn, mortgage rates were much higher than usual due to lockdown, closures of business, and less spending all round.  

So, while for many it’s been difficult to pull together a big enough deposit, othermanaged to take advantage of the stamp duty holiday and buy themselves a new house.  

What will happen to the housing market this year?  

Last year proved to be an interesting time for the housing market. Many have been trying to predict what will happen to house prices this year, in order to hedge their bets 

The first thing you should be aware of is that the cut on stamp duty will be coming to an end soon – 31st March 2021 to be exact. People wanting to take advantage of this will need to complete a sale on a house before then.  It’s possible that more people will want to buy now before the window closes. So, it could be that prices continue to rise and then start to come down in spring. Let’s look at some numbers: 

  • Rightmove predicts that house prices will rise by 4% on average this year, but they’ve suggested that there may be a decline after the stamp duty holiday ends 
  • Zoopla suggest that there will be increase in prices by 4% which will slowly come down to 1% as 2021 ends 
  • Halifax reckons we’ll see decline between 2% and 5% by the end of 2021 

While there may be some similarities in these predictions, nothing is certain. Currently, it’s not definite how long it will be before lockdown restrictions are lifted. This means it’s difficult to know exactly how different industries will be affected throughout the year, and what that means for the housing market. 

Should I buy now, or wait? 

It’s difficult to know whether buying is a good move right now. It depends on how urgently you need to move and or whether you can afford to wait to see if prices will drop. It's a good idea to keep an eye on the going mortgage rates and properties near you. Keep checking Rightmove, Zoopla and Halifax to see if their predictions change.  

Remember that the stamp duty holiday is coming to an end as well – so bear this in mind when planning out your budget if you decide to wait until spring or later.  

A bit of good news if you want to make the move 

One bit of good news is that 90% mortgages are making their way back into the market. However, you should be wary – the interest rates are still much higher than before the pandemic.

The good thing about the return of 90% mortgage offers is that more competitive deals should begin to show upSo, if you’re serious about moving, make sure you shop around and do your research carefully.  

Another thing to bear in mind is that due to the pandemic, less people are commuting. If you’re someone who’s working from home and will be for the foreseeable, you could widen the net for locations you’re looking in. This will give you more options if you decide to look further afield.

For example, you could consider moving out of the city and into somewhere more residential, which could be cheaper. Just be confident that distance won’t be an issue in the future if you need to go back to the office.  

If you’re preparing to get on the ladder soon, here’s some hidden fees of buying a house you should know about.  

Disclaimer: All information and links are correct at the time of publishing.

author: Sarah Neate

By Sarah Neate

How is the pandemic affecting house prices? How is the pandemic affecting house prices?