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Where will UK house prices settle

UK house prices are reacting to the swing of the pandemic pendulum. The stamp duty holiday, low mortgage rates and lack of supply have had a knock on effect on average house prices, causing them to increase significantly over the past year. The issue is that in the past few weeks we have seen the indexes issuing conflicting figures in the UK property press. Under a month ago Land Registry reported a decrease of 2.2% between the months of March and April, which was quickly superseded by Rightmove claiming an increase of 0.8%. Not to be outdone, Halifax then jumped on the bandwagon claiming prices fell 0.5% in June making the average house price now £260,358.

The reason? The stamp duty holiday. It has had almost as many false endings as the Lord of the Rings, causing buyers to adjust their offers accordingly. The question is where will property prices rest once the Stamp duty holiday dust settles and will many people’s relief at making it be replaced with the niggling doubt…did I overpay?

So what will happen to UK house prices?

The average house price is now 8.8% higher than it was a year ago. Even with the tax break incentive gone, I believe prices are unlikely to fall back to the same pre-pandemic level. The general consensus is while mortgage rates and housing stock remain low, prices will retain most of the value garnered during the past year. Dramatic headlines declaring the housing market ‘red hot’, ‘scorching’ and ‘on fire’ will dial down to ‘cooling’ as buyers and sellers take a moment to take stock.

For those who missed the ‘discounted’ trip and for those about to embark on a ‘full price’ voyage to greener or alternative pastures, be comforted. Many may have seemingly paid more during the past year but I suspect house prices will adjust to a level similar to what it would be, if you subtracted the tax deduction but included some uplift. Meaning the value is more or less the same.

What will buyers and sellers do post holiday?

Many first time buyers will dejectedly retreat back to rented or the family home to continue saving for a now larger deposit. Whilst others, post lockdown, may find their love affair with the City rekindled and decide to stay put. For those still desperate to move they will wait patiently for stock to come on and hope there will be enough choice available, that they aren’t put in the same bidding stranglehold they’ve been subject to in the past year.

And what of those who question their move?

For those cash rich buyers who were overzealous with their bidding, they may have to sit out the market before realising any profit but I suspect their move was for the long term rather than the short term.

What interests me more is The Bank of England, who among others last week, requested that all employees return to the office once a week. This seems perfectly manageable for those who have fled the City but I wonder what the situation will be like in another 6/12/24 months. Will more days be clawed back by employers? I don’t think we will return to a fully functioning 5 day week in the office but I can easily see 3 days becoming a reality in some sectors.

As commuter habits have now changed, news of flexible rail season tickets comes as no surprise. How the pricing for this will differ year on year and how the excess travel will sit with worker bees could provoke regret. Resulting in some looking to invest in a smaller place in town or moving back.

My advice for anyone looking to buy or sell now? 

By the end of summer we should all have a clearer picture of what is happening within the property market. Till then, if you need to move and you’ve seen something you like, go for it, negotiate, but be prepared for a wait if your seller needs to find an onward purchase.