Home Featured The UK Property Market – What Goes Up Must… Stay Up

The UK Property Market – What Goes Up Must… Stay Up

by Keerat

By James Forrester, Managing Director – Barrows & Forrester & StripeHomes

 

Let’s go back. It’s April 2020 and property experts are almost universally aligned – house prices are going to crash due to the recently declared pandemic.

Prophecies of doom ranged from a drop of 5% by some to as much as 35% by others. The so-called experts that lined up to flog this particular whipping post of negativity ranged from the Bank of England to HSBC to Lloyds to Knight Frank, Reuters and the Royal Institution of Chartered Surveyors – these are big institutions of UK property.

The media thought that this all made sense in the face of a global catastrophe and so went to work doing what they do best and proceeded to pick out the worst bits of the worst press releases issued by these and other organisations and then sold lots of ads and papers by ‘explaining’ that each of us that owned a home was about to watch our property equity disintegrate faster than a politicians’ promise.

 

 

Try this helpful headline as an example of the furore peddled by national newspaper editors:

“Desperate Sellers Slash Prices In Battle To Sell Homes Before Coronavirus Sends Prices Plummeting By Up To 16%” – Daily Mail, 13 May 2020.

There’s some choice hyperbole in that sentence including the words ‘slash’, ‘battle’ and ‘plummeting’, all designed to convey maximum shock and, potentially, a hideous self-fulfilling prophecy.

Well, it turns out that newspaper editors and the experts at the esteemed institutions referenced above, are about as reliable and trustworthy as, well, estate agents. Oh the irony…

Roll forward two years and house prices have risen faster than at any time since 2007 and comparable to how they performed in the late 1980s. This, my friends, is the polar opposite of what was predicted.

In fact, house prices are approximately 19% higher now than in March 2020 when Covid first hit. To put that into perspective, at the average house price back then of £231,000 (Source: ONS) the typical home has earned £43,800 since, yet the intelligentsia that scrambled to have their authority on property economics published far and wide, said that the average three-bed would shed as much as £80,800.

Oops.

Much of this fizz has emanated from stimulus that government introduced to subsidise the housing market and this, it has to be said, was always going to be the case. Rishi Sunak, our benevolent Chancellor (for now at least), took a property market that had been closed during much of March, April and May 2020 and lit a fire under it in June with the announcement of a temporary relinquishing of stamp duty on the first £500,000 on all home purchases.

When I say all, I mean that this applied not just to first time buyers, for instance, but to everyone – second steppers and even buy-to-let investors albeit that the top-up surcharge that his predecessor had hoisted upon the latter, stood. All the same, investors and also those buying houses with million-pound price tags stood to save up to £15,000 in tax.

A mad scramble ensued until the cessation of this ‘gift period’ in June 2021 resulted in property transactions hitting a record 1.5 million sales last year – up by around 50% on normal levels. Prices rose too in 2021 by about 11%.

 

 

Now, here’s the thing. Even I as the biggest optimist within my industry thought that June 2021 would see a slowdown in price growth – not a drop in prices but a flatter growth curve. But it seems that even I am wrong on occasion and what we’ve seen since Q3 of last year into Q1 this year is a sustained and relentless appreciation of values.

In fact rather than an easing of buoyancy, the very latest numbers from Rightmove, the leading UK property portal, released in late February, show monthly increases in asking prices of 2.3% across the UK. If annualised, that’s a hike of 27.6%, some eight months after Rishi put his fiscal toys away.

And at a regional level you’ll find asking prices – the price set by sellers and not necessarily accepted as a ‘sold’ price by buyers – tops out at +7.5% in Scotland, +6.2% in the Yorkshire region and in my own areas of the North East and West Midlands – +2.6% and +2.1% respectively.

These are monthly increases – not annual. Again, I stress, the Rightmove Index is an analysis of speculative asking prices and shows rather a lot of continued optimism amongst home sellers and the estate agents that are advising them.

At this rate I have to conclude that what goes up (and has done) will stay up. House prices seem to be indefatigable, indestructible even, drizzled in Teflon sauce with a side order of Kevlar.

Will you bet on house prices this year doing anything other than rising? My prediction is we’ll see UK values increase by between 5% and 7%, pushed along by a London market that will re-ignite now that overseas buyers are back on planes and able to enter the country and the market unhindered.

I’ll stump up £250 to a charity of my choice if I’m wrong.

 

James Forrester is Managing Director of Barrows & Forrester Estate Agents and of StripeHomes, a North East & Midlands housebuilder.

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