UK house prices soar to record highs outside of London
- UK house prices hit record highs in 2021
- Is Chancellor Rishi Sunak’s stamp duty holiday causing the UK property market to overheat?
- House prices in Wales see the highest growth in Britain
- Investors expected to find UK housing market appealing after stamp duty holiday ends
UK housing prices continue to soar in 2021, fuelled by Chancellor Rishi Sunak’s stamp duty holiday, shows new data from FTSE 100-listed online real estate portal, Rightmove.
According to the property portal Rightmove, the average asking price for property in Britain hit a third of a million British pounds (GBP) between April 11th and May 8th 2021- 1.8% higher than the previous month.
Figures from Rightmove revealed that asking prices in the UK are now 6.7% higher than pre-pandemic levels, averaging at GBP 333,564 (USD 470,612).
Buyers continue to take advantage of Chancellor Rishi Sunak’s stamp duty holiday, which was introduced in July 2020 and extended until September-end.
Buyers can benefit from the tax break on property worth up to GBP 500,000 until June 2021; after that, the threshold will be reduced to GBP 250,000 for everyone in England and Wales except first-time buyers before coming to an end in September.
Since its introduction, the stamp duty holiday extension has driven UK property prices higher, with first-time buyers and homeowners eager to take advantage of the tax break or upsize following months of stay-at-home orders.
The demand for large homes and outdoor space has become evident in the migration from cities to more rural areas, with housing prices in London just 0.2% higher than Wales and northern England, which have seen double-digit rises since March 2020.
While property prices in London remain approximately three times higher than in the north of Britain at GBP 640,373, Rightmove said that the overall growth ratio was the smallest recorded in eight years.
However, the imbalance in supply and demand allows sellers to ask for higher prices in many parts of the country, particularly more rural and coastal areas such as Wales, which has also come out as one of the top staycation destinations for 2021.
Data from Rightmove further revealed that average asking prices in Wales had seen the highest growth in all of Britain, with property prices in the “Land of Castles” up by 13% since the first national lockdown.
Wales sees the highest house price growth in Britain
After an initial decline in housing market activity following the first COVID lockdown, the number of UK property transactions surged after Britain’s finance minister launched the tax break.
The coronavirus pandemic has also altered buyer priorities, and those who can afford to upsize have sought out larger houses with “homecation” facilities and pleasant garden spaces.
Another trend emerging in 2021 is “zoom rooms”, as the need for homes better suited to remote working is increasing in importance following COVID-19.
Tim Bannister, Rightmove’s Director of Property Data, insists that “last year’s unexpected mini-boom is rolling on into 2021, with rising prices and market activity records again defying many predictions.”
Real estate agents in Wales have said the COVID-19 pandemic has sent the Welsh property market into a frenzy, noting that the massive influx of buyers is overwhelming supply and affordability.
With work from home becoming the norm, there’s no need to stay near office buildings, and as a result, many people are leaving the City and bringing dreams to move to the country, beach or coast forward.
Furthermore, the chaos expats are facing as a result of Brexit has caused a cohort of Brits to return to the UK, with many arguing that it is not worth living in the EU without freedom of movement.
However, Welsh buyers and agents have expressed their frustration over spiralling asking prices and the lack of supply due to the thousands of people moving from cities to live or buy holiday homes in Wales.
In Cardiff, the average family home at mid-range value is now worth around GBP 400,000, and the ongoing price frenzy has given rise to questions about whether the UK property is about to overheat.
MGY Estate Agents Director James Thomas said: “Buying behaviour in Wales is the craziest it’s been in a long time, as properties across all price ranges are selling well, even the high-end.”
The surge in demand for suburban areas of southern England has now extended right across the nation, says Rightmove. Even London, which has seen relatively small growth, is expected to remain appealing against a broader backdrop of a buoyant UK real estate market.
Some experts have raised concerns about whether the tapering down of the stamp duty holiday would impact investment into the capital, especially London’s luxury property market.
However, research conducted by Savills estate agents has shown that the City’s residential market continues to show signs of recovery, with the well-regulated market offering investors good returns and high yields from rent.
Britain continues to be a popular destination for investors
The United States has long been an attractive destination for property investors, but in recent years, Britain – London, has gained popularity for several reasons.
The first and most primary reason being the country’s stable property market but the comparatively low stamp duty and weak British pound (GBP) are also contributing factors.
Domenica Di Lieto, the chief executive of Emerging Communications, said that as “Britain remains the single most popular option for acquisition, the potential for Chinese investment is significantly great now and beyond 2021 due to the growing number of high-net-worth individuals (HNWIs) in China.”
Ms Lieto noted that China was the only advanced economy to expand during the coronavirus pandemic and is on track to becoming the world’s largest economy in six years, with benefactors of growth expected to be the Chinese middle-class.
She added: “The US-China trade war has seen Chinese student enrolments in America tumble in favour of British universities, which should boost investment in the UK as supporting children studying abroad is the single biggest driver of residential interest for the Chinese.”
Meanwhile, independent research conducted by real estate company Savills revealed that London’s residential market had demonstrated solid signs of recovery.
According to Savills, the number of luxury property transactions completed in the four months leading to April hit multi-year highs, with more GBP 5M-plus sales recorded during this period than in any year since 2014.
Savills explained that the “Boris bounce is driving the rise in luxury property transactions”. Under his premiership, Britain reached a Brexit trade deal with the EU, and the government launched the stamp duty holiday.
Although growth in London’s property market is notably slower than in other areas of the country, COVID-19 does not appear to have dented the City’s appeal, and experts expect the capital to remain a popular destination for investors irrespective of the new 2% surcharge for overseas buyers.
London’s slow growth also creates opportunities for entry-level investors, with the rent-to-rent concept becoming a popular strategy.
Instead of saving a significant deposit to purchase housing, budding investors can start by managing someone else’s rental property for a few thousand pounds (GBP).
Not only could this type of investment cost less than GBP 10,000 depending on the area the property is located, but it offers start-up investors a way to gain valuable experience.