A number of factors pushed UK house prices up this summer. Changing housing preferences due to Covid-19, a relatively low supply of homes, low-mortgage rates and the Stamp Duty holiday all played their part. They collectively fuelled a red-hot housing market and caused house prices to rise to levels not seen before.
However, there have been signs that the market might be cooling down. Could it be that summer 2021 marked peak house price growth? Could growth slow down in the foreseeable future? Hamptons estate agents seem to think so. Here is the lowdown.
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What is happening with growth in the housing market?
It’s been a strong year for the housing market as buyers have rushed to take advantage of the Stamp Duty holiday and families have sought larger homes. As a result, more homes are expected to be sold in 2021 than in any year since 2007.
Hamptons predicts that by the end of 2021, as many as 1.5 million homes will have been sold across the UK.
Has the growth of house prices reached its peak?
The latest Office for National Statistics data shows that house prices in the UK rose by 8% in the 12 months to July, down from a peak of 13.2% in June.
According to Hamptons, it’s likely that summer 2021, when the tapering of the Stamp Duty holiday began, marked peak house price growth in the UK.
The estate agent expects growth in house prices to slow down in the coming months. It anticipates that by the end of 2021, the annual increase will have slowed to around 4.5%. This will leave the average price of a house at around £258,000.
However, according to Hamptons, “a second wave of lockdown-induced demand” is likely to keep house price growth positive for a while longer. They expect prices to rise by 3.5% in 2022, 3% in 2023 and 2.5% in 2024, after which the current housing cycle will end.
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Is now a good time to buy a house?
The expected slowdown in house price growth is undoubtedly welcome news for aspiring buyers.
However, the reality is that house prices are still significantly higher than pre-pandemic levels. And Hamptons predicts that growth is still likely to continue, though at a much slower rate. So, those buying now and in the foreseeable future still might have to dig deeper into their pockets to afford a home.
Additionally, the supply of houses remains low. So, even if you have sufficient funds and decide to buy now, you could end up in a bidding war with other buyers to secure the home you want.
On the other hand, mortgage rates are currently near historic lows. The lower the mortgage rate you can bag, the lower the repayments you will make each month.
However, when it comes to deciding whether to buy a house, your decision should not be influenced solely by these market factors or conditions.
The most important thing to focus on is finding the right home for your needs and your personal financial situation. Be sure you can cover all costs, including mortgage repayments, maintenance costs and insurance. And make sure the property suits your long-term needs not just your current budget.
Before you commit to a mortgage, it could be a good idea to speak with a financial adviser. They can provide guidance or advice on your financial situation and explain whether or not a certain opportunity is appropriate for your circumstances.
