House prices hit all-time high as post-lockdown boom sparks biggest monthly rise in 16 years
HOUSE prices have hit an all-time high after a post-lockdown boom sparked the biggest monthly rise in 16 years.
But experts have warned a crash is likely to follow when the full impact of coronavirus hits following the furlough scheme ending in October.
According to new data from building society Nationwide, the average price of a home is now £224,123, while demand from buyers is 34% higher than a year ago.
The last month saw the average UK house price increase by 2%, the largest rise in a single month since February 2004, when prices jumped 2.7%.
It could indicate that buyers are beginning to shake off ongoing uncertainty about the economy, and will also have been helped by the continued easing of lockdown measures.
But fears remain about the final impact of the coronavirus on the job market and its knock-on effects on demand for housing.
The Royal Institution of Chartered Surveyors (Rics) warned just last month that while the UK housing market could be heading for a boom, this is likely to be followed by a bust.
The study suggested house price rises won't continue when wider government schemes, including furlough, are phased out later this year.
There are also fears the property market will slow once a stamp duty holiday comes to an end on March 31 next year.
House prices saw significant falls earlier this year after the coronavirus lockdown was imposed and the market was put on hold.
It's also becoming harder to buy a home in the first place with lenders tightening affordability criteria and pulling mortgages - particularly for those with smaller deposits - which will hit first-time buyers hardest.
Just 70 mortgages for those with a 10% deposit were available at the start of July compared to 779 in March, according to comparison site Moneyfacts.
What's caused a rebound in prices?
On today's all-time high in prices, Nationwide chief economist Robert Gardner said: "The bounce-back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.
"This rebound reflects a number of factors. Pent-up demand is coming through, where decisions taken to move before lockdown are progressing.
"Behavioural shifts may also be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
"Our own research, conducted in May, indicated that around 15% of people surveyed were considering moving as a result of lockdown."
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa - It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan - The Government will lend you up to 20% of the home's value - or 40% in London - after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa - This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the website.
Areas across the UK have seen examples of dramatic jumps in the prices of homes in recent months.
One four-bed detached home in Nottingham is currently on the market for £675,000, while a similar property nearby sold for £620,000 only in May.
In Leeds, one four-bed detached home is listed for £975,000, while two separate four-beds sold for £870,000 just four months ago.
In Manchester, a five-bed semi-detached house is being offered for £695,000, while a similar home in the same area sold for £550,000 in May.
Why could this price rise be followed by a slump?
The stamp duty holiday announced by the government in July could boost house prices further.
But Mr Gardner warned that a massive rise in unemployment would probably send the housing market back into a slump.
The end of the furlough scheme on 31 October could result in more job losses.
And the end of government protections for renters could see more properties hitting the market.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
Up until July 8, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
This was temporarily increased to £500,000 until March 31, 2021 in the government's mini-Budget in July 2020.
The rate a buyer has to fork out varies depending on the price and type of property.
Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you're a first-time buyer.
The usual system in England for residential properties means:
- First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
- You pay nothing if the property costs below £125,000
- You pay 2 per cent if it is worth between £125,001 and £250,000
- You pay 5 per cent if between £250,001 and up to £925,000
- You pay 10 per cent if it is between £925,001 and £1.5million
- You pay 12 per cent on anything over £1.5million
For second homes or buy to let properties:
- 3 per cent on purchases up to 125,000
- 5 per cent on purchases between £125,001 and £250,000
- 8 per cent on purchases above £250,001 and £925,000
- 13 per cent on purchases above £925,001 and £1.5 million
- 15 per cent on purchases above £1.5 million
Stamp duty rates are different in and .
Chris Sykes at mortgage broker Private Finance said: "The ending of the Government's eviction ban in September could lead to a surge in landlords trying to remove tenants from properties.
"This may cause a great deal of negative publicity, possibly suppressing appetite for new buy-to-let purchases.
"Landlords may even sell some of their properties to avoid potential difficulties moving forward."
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