House prices recovered to hit an all-time high in August, but the sharp rise in average prices has masked many losers in the coronavirus housing market amid fears the price surge will peter out.
The Nationwide Building Society reported on Wednesday that UK house prices rose 2 per cent in nominal terms in the past month alone, the fastest monthly rate in more than 16 years, despite the country entering its deepest recession on record in the second quarter.
The surge in prices stemmed from the reopening of the housing market in May alongside the stamp duty holiday on property values of less than £500,000, announced in July, which runs until the end of March next year.
The recovery in activity has pushed average prices up to a level 3.7 per cent higher than a year earlier, the building society said. “House prices have now reversed the losses recorded in May and June and are at a new all-time high,” said Robert Gardner, Nationwide’s chief economist.
The new housing market is far removed from pre-pandemic conditions, however, with many variations based on types of property in demand and their location as people consider a future where proximity to the office is less important.
Jonathan Hopper, chief executive of Garrington Property Finders, said: “Prices are rising fastest among coastal and country properties as buyers [are] planning for a new work-life balance built around less commuting and seek more green space, fresh air and better value.”
In hotspots outside London, properties are selling at rates rarely seen since before the 2008-09 financial crisis. “A stunning proportion of properties are now going for the asking price or more, and offers are flooding in. It’s like lockdown was a bad dream,” said Lucy Pendleton, of independent estate agent James Pendleton.
Separate research from property portal Zoopla showed that in the third quarter there had been a surge in demand for larger properties in London, while demand for one-bedroom flats tumbled. Nationally, surveyors expect prices to fall in London but to rise in most other regions, according to the latest survey by the Royal Institution of Chartered Surveyors.
In such a divergent market where the mix of properties sold has been changing rapidly, finding a genuine average price for the whole UK is proving extremely difficult according to Richard Donnell, director of research at Zoopla.
More large homes in wealthier areas have been listed and sold, Mr Donnell said, with the effect that the unadjusted median asking price on the Zoopla portal was 12 per cent higher than a year ago. “The rebound in housing demand is creating more ‘transaction bias’ than normal as we see a big shift in the price and type of homes that are selling as a result of the lockdown,” he said.
But the stamp duty holiday and low interest rates are not helping all buyers, keen on a new place to buy and live. Those wanting large mortgages worth 90 per cent or more of a property’s price are having to pay higher interest rates on average even though the Bank of England’s official rate has plunged from 0.75 per cent to 0.1 per cent since the pandemic struck.
Andrew Bailey, the BoE governor, told a parliamentary committee on Wednesday that this change in the average cost of a mortgage for buyers with relatively small deposits was due to lenders withdrawing some of the cheaper deals from the market. "All the evidence is that the cuts we made [in the BoE's base rate] have been broadly passed through," he said.
Central bank data show that at the end of July, the average quoted interest rate on a two-year fixed rate mortgage with a 90 per cent loan was 2.66 per cent, 0.51 percentage points higher than a year earlier, while those with much larger deposits were benefiting from lower mortgage rates.
Neil Hudson, director of Residential Analysts, a consultancy, said that those who could not access a large deposit were clear losers in the current housing market, but were not affecting the prices of the properties in high demand at present because there were many other cash buyers and those with significant home equity fuelling the recovery.
“It appears the economic fallout [of coronavirus] has been mostly felt by the young and low earners — those least able to buy a home,” Mr Hudson said.
Many property market experts warned that the jump in house prices could be shortlived when unemployment rises after the furlough scheme tapers out this autumn and the stamp duty regime changes next spring.
Tobi Mancuso, director of property investment company Track Capital, said: “The danger is that this frenzy could create a bubble in house prices that will be quickly deflated when stamp duty returns.”
Howard Archer, chief economic adviser to the EY Item Club, said: “We suspect that the housing market is likely to come under pressure over the final months of 2020 when there is likely to be a significant rise in unemployment as the furlough scheme draws to a close in October.”
Overall “the recovery in the house market has so far been V-shaped”, said Hansen Lu, property economist at Capital Economics, a consultancy. But he warned: “We expect the recent frenzy in housing demand to cool over the next few months.”
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzUzYTc2ODI4LTc3NjMtNDUxYS05OWQ2LWU3YmRkMmJkOTZkN9IBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzUzYTc2ODI4LTc3NjMtNDUxYS05OWQ2LWU3YmRkMmJkOTZkNw?oc=5
2020-09-02 12:40:00Z
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