UK house prices jump 4.7% reaching hit a record high of £245k

The average UK house price jumped 4.7 per cent this year, reaching a record high of £245,000 in September, official figures show.

It meant home values were up £11,000 on average compared to a year ago, according to the Office for National Statistics (ONS), with the property tax holiday being one of the driving factors behind the upward trend.

The typical London house price also hit a record high of £496,000 in September, the ONS said.

Average house prices increased over the year in England to £262,000 (4.9 per cent), in Wales to £171,000 (3.8 per cent), in Scotland to £162,000 (4.3 per cent) and in Northern Ireland to £143,000 (2.4 per cent).

A stamp duty holiday on property sales in England and Northern Ireland was introduced by Chancellor Rishi Sunak in July. Similar cuts were made on the property sales taxes that apply in Scotland and Wales. 

Nicky Stevenson, managing director at national estate agent group Fine & Country, says the property tax breaks have helped the property market ride out the pandemic.

She told This is Money: ‘No part of the UK economy has flown over the Covid storm like the property market and the picture in September strengthened across the board.

‘This is the first time the index will have included the first sales that didn’t only benefit from the stamp duty tax break but were prompted by it too, and it shows.

‘Much is being made of the stamp duty boost at the moment but the Help To Buy scheme also becomes less generous at the end of March. This will continue to be a contributing factor as we head into next year but it’s the stamp duty holiday that is stealing the show at the moment.’

However, Anthony Codling, chief executive of property platform Twindig, warns that the ‘increase is slowing’ and while it seems the stamp duty holiday is working ‘mortgage, surveying and conveyancing bottlenecks are acting as a brake on the UK housing market and may lead to many missing the stamp duty deadline’.

The ONS index is based on completed transactions. As a house sale typically takes six to eight weeks to complete, the price data feeding into its September index has started to reflect these tax changes.

A stamp duty holiday on property sales in England and Northern Ireland was introduced by Chancellor Rishi Sunak in July. Similar cuts were made on the property sales taxes that apply in Scotland and Wales

The report said: ‘The tax holiday is due to end on March 31 2021 across the whole of the UK. This may allow sellers to request higher prices as buyers’ overall costs are reduced.’

The ONS said the recent price increases may reflect a range of factors – including pent-up demand, some possible changes in housing preferences since the coronavirus pandemic, as well as a response to the changes made to property transaction taxes across the nations.

Jonathan Hopper, CEO of Garrington Property Finders, thinks the pandemic and ‘months of confinement’ is a driver for the price spike.

He adds: ‘Of all the unexpected consequences of Britain’s Covid crisis, the house price boom is perhaps the most surprising.

‘Lockdown living sparked the fire, as months of confinement led thousands of people to decide that they wanted more from their home – more space, somewhere comfortable to work and a better standard of life away from the big cities.’ 

Home values were up £11,000 on average in September compared to a year ago

The report confirms that demand for bigger homes has grown. The average price of detached properties increased by 6.2 per cent in the year to September, in comparison to flats and maisonettes increasing by 2.0 per cent over the same period.

Commenting on this move towards more space, Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Detached homes have the most space and bigger gardens than say terraced homes, thereby fuelling their popularity among those who can afford them.’  

Tomer Aboody, director of property lender MT Finance, says that the demand for bigger homes has meant new-build values have fallen over the past year as older houses tend to offer more room.   

He adds: Developers may also have been too optimistic on pricing, and are now being forced to be more realistic, adapting to reflect.’

Over the past four years, there has been a general slowdown in UK house price growth, driven mainly by a slowdown in the south and east of England.

But the ONS said the start of 2020 was already seeing a pick-up in annual growth in the housing market – before the coronavirus restrictions were put in place at the end of March 2020.

Looking within England, the report said the South West was the English region with the highest annual house price growth, with average prices increasing by 6.4 per cent to £275,000 in the year to September.

The lowest annual growth was in the North East, where average prices increased by 3.3 per cent over the year to September. The North East region continues to have the lowest average house price within England, at £136,000.

In contrast to the record house prices hit in London, the North East is the only English region yet to surpass its pre-economic downturn peak of July 2007.

Commenting on the ONS report, Mark Manning, managing director of Leeds-based estate agent Manning Stainton, said: ‘September was an exceptional month for the housing market, with sales and asking prices massively up on the same period last year.

Looking within England, the report said the South West was the English region with the highest annual house price growth, with average prices increasing by 6.4 per cent to £275,000 in the year to September

September 2020 saw UK house price growth at its highest level since October 2017

‘We usually see activity begin to slow slightly in September. But pent-up demand from the summer lockdown and the race to buy before the stamp duty holiday ends has resulted in record activity levels.’

Anna Clare Harper, CEO of asset manager SPI Capital, added: ‘The fundamental drivers of housing demand are strong and we are in an environment of low interest rates, with reduced rates of new buildings coming onto the market and limited existing stock.’

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said the report ‘underlines what we were seeing at the tail end of the aftermath of the first lockdown mini-boom’.

He continued: ‘Since then, activity cooled and was replaced by a more cautious approach before the prospect of a Covid-19 vaccine reinvigorated the market.

‘The stamp duty concession has proved to be a particularly important contributory factor and will continue to be so until prospects of meeting the spring deadline recede, unless of course the Chancellor is minded to reconsider.’

Lucy Pendleton from estate agents James Pendleton said: ‘This was the moment the market really entered fifth gear this year, leaping from the doldrums into the jet stream with the full weight of lockdown and the stamp duty holiday behind it.

‘After weighing on the market nationally in recent years, London is once again helping to lead the way. Buyers in the capital celebrated the stamp duty changes by delivering record prices that are now only a whisker away from the half a million pound mark. Expect this rate of growth to cool though.’

Chestertons’ Managing Director, Guy Gittins, says the London sales market started its ‘seasonal slow-down’ in October but it remained 40 per cent higher than last year and at a five-year high.

He concludes: ‘The sales market will always slow as we approach the winter months and so the lower number of enquiries and registrations compared to September was to be expected. 

‘However, we are pleased to see that activity levels are still tracking well above last year’s figures and are at the highest levels for five years. The emergence of the second wave of Covid cases didn’t have any significant impact on demand.’