UK Housing Market Update

Updated: Mar 17, 2021

When the UK entered its first lockdown 12 months ago and the World seemed to be lurching out of control, how many commentators would have predicted what happened to the housing market next?

Let’s take a look at the facts

The latest Hometrack report data runs to the end of Jan 2021 and shows:

  • UK wide house price growth of 4.3% YoY.

  • Liverpool House Price growth 6.8% YoY.

  • Manchester House Price growth 6.3% YoY.

  • London House Price Growth 2.7% YoY.

  • Demand for housing up 12.4% on the same time last year.

According to the Nationwide House Price Index for February, UK house prices have increased 6.9% annually.

According to Halifax house prices in February were up 5.2% annually for the UK.

Remember, the YoY numbers above are based on sales completed, not offers accepted.

I have personally viewed around 250 properties for sale in the past 12 months, albeit mostly in Greater Manchester. I have seen estate agents inundated with requests to view, properties selling within days, buyers entering bidding wars. I strongly suspect the figures will continue to grow well into 2021.

But what is feeding all of this growth?

The Stamp Duty Holiday

Loved by some and ridiculed by many, whatever your opinion on The Stamp Duty Holiday and subsequent extension, the impact appears undeniable.

Zero stamp duty for main residence buyers up to £500K and the same saving applied to investors, leaving just the 3% surcharge to pay. On a £500K purchase, this equates to a £15K in savings or 3%. But house prices are up by more than 6% in some areas, so there must be more to it than this.

Stamp Duty increases for Overseas Investors

From the 1st April 2021 there will be a 2% stamp duty surcharge for overseas investors. Through the work I have done with my overseas buyers, I have certainly witnessed a rush to complete before this cut-off date. Wind the clock forward to October 2021 when all of the stamp duty relief is removed and an overseas investor will be forced to pay an eye watering 8% stamp duty in total, equating to £40K on a £500K purchase.

Hong Kong Buyers

Turbulent political times in Hong Kong and relaxing of the visa requirements for Hong Kong BNO (British National Overseas) passport holders have led to a surge of buyers entering the UK property market over the past 12 months. Whether looking to invest, relocate or both, the buying power from Hong Kong has had a significant impact on the market, especially in the North West of England.

Cheap Debt

Interest rates have been incredibly low for such a long time now, people seem to forget how unusual a situation this is. With debt being so cheap and the resultant low monthly mortgage premiums, taking on debt seems more attractive to many than ever.

The Rush for Space

As the way we work has changed, possibly forever, more and more people are looking for space. This has led more buyers to move out of city centres and apartments, looking for larger properties with more outdoors space. This has certainly fed market activity, but just how much is harder to quantify. Will we return to normal soon? Honestly? I think so yes. Perhaps not exactly how things were, but I do think people will return to the office and central London over the next few years. Prime Central London is one of the very few areas in the UK where house prices have remained basically flat for the past 12 months, I don’t see that being the case for long.

Quantitative Easing (Money Printing)

I will keep this section simple so that I don’t blow your tiny little mind. The Bank of England has been buying government backed bonds like crazy over the past 12 months, which in real terms mean debasing the currency. If pounds sterling is being devalued, why would you want to save it? Surely it makes more sense to take on incredibly cheap debt (see above) in the form of mortgages, which is what people are doing in their droves.

Supply vs Demand Economics

High demand is outstripping supply and pushing up prices: new seller numbers are 21% down on last year as owners of family homes delay coming to market, perhaps due to home-schooling distractions. We may find more properties come to the market as the schools go back and life begins to return to normal, freeing up time for moving home.

What is likely to happen next?

Nobody really knows what is going to happen next in the housing market, but there are always those who like to make predictions. Firstly there are the serious-minded forecasters such as Savills and Hamptons…

The latest Savills forecast predicted that 2021 would be completely flat in the residential market with 0% growth across the UK. However, in a press released dated 9th March 2021, they have increased this to 4% across the UK. This increase is clearly linked to the recent stamp duty holiday extension, but was that really such a surprise? Overall, it just makes me question the validity of their predictions. What exactly are these people paid to do?

The self-professed ‘home experts’ Hamptons predict a modest 2% increase in GB house prices in 2021.

The main problem with these types of forecaster is they always soften the edges of their predictions and aim for something vague and in the middle. Neither of these two predicted 6% + growth in 2020, but that is what happened.

An even more unreliable source for your property forecasting is the mainstream media. Depending on who you want to believe, they are variously predicting a house price crash later this year or house price growth of between 2-5%. Despite there being some decent property commentary out there (See my weekly Newsletter), in general it seems their main aim is to grab attention and sell papers, or in the case of the online media outlets – self advertising space or act as click bait.

I tend to look long term and believe the property market to be cyclical. I believe what we are seeing now is the 18 Year Property Cycle perfectly playing out (link to my article).

My predictions for 2021 are as follows:

  • UK house price growth of 4% in 2021

  • Manchester and Liverpool house price growth of 6% in 2021

  • North West, Yorkshire and the Humber house price growth of 5% in 2021

  • London house price growth of 2% in 2021

But what do I know?

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