What’s next for house prices? Will they fall after hitting 16-year high
HOUSE prices have soared since the coronavirus lockdown was eased but it's left many buyers and sellers wondering if it will last.
The rise has been dubbed a "mini boom" after house prices saw their biggest monthly rise in 16 years in August and mortgage approvals reached their highest for 13 years.
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Property values jumped by 2% in August, compared to July, the largest rise since February 2004 when prices increased by 2.7%, according to Nationwide.
And house prices increased again in September, up 0.9% on August and up 5% on the same month last year which was the biggest yearly rise seen since 2016.
Separate house price data from Halifax also shows the fastest growth in more than four years.
The lender said it received more mortgage applications in July, August and September than at any time in the last 12 years.
There are two main reasons for this current boom.
There's pent up demand from the Covid-19 lockdown - everyone who wanted to move but couldn't because of restrictions can now go ahead with their house purchase.
There's also a temporary stamp duty holiday which has helped boost the market - people have scrambled to take advantage of this tax break before it ends on 31 March next year.
It's positive news for sellers who can seize the opportunity to cash in, but for buyers it means risking paying over the odds if the house price boom doesn't last.
It's left us asking: how long can these record-breaking prices last now that the UK is officially in a recession?
We've spoken to industry experts to find out what we can expect from the property market over the next few months.
What has happened to house prices since lockdown?
Around 373,000 home sales worth a total of £82billion were put on hold between March and April this year due to lockdown measures, according to Zoopla.
It was a great blow to the industry as spring is typically the busiest time of the year for the property market.
This, combined with the fact Brits were forced to spend more time at home, saw a huge rush from buyers to snap up their next home.
Since the market reopened in May, it's been flooded with buyers looking for extra room and outdoor space and this increased demand has helped push up prices.
Values have also risen thanks to a stamp duty land tax holiday announced by the Chancellor Rishi Sunak in his mini-Budget back in July.
Before, buyers didn't have to pay tax on the first £125,000 but now this has temporarily been pushed up to £500,000 until March 2021.
On average, it will save buyers £4,500 which leaves purchasers more cash to put towards their offers.
Halifax found in the first month since the tax break was introduced, house prices went up by 1.6% - or £3,770 - on average, the first rise in four months.
Many industry stakeholders like mortgage lenders and estate agents publish their own monthly reports that track house prices across the UK and monitor how they change.
Of course, research that covers a longer period of time, such as quarterly or annual, gives a more accurate overview of the market.
But recently, they've all been pointing towards a similar trend - that house prices are rising.
And official figures confirm this too.
According to the Land Registry, house prices increased by 2.3% in July.
Will house prices fall?
Many experts believe that this mini boom won't last much longer, with some suggesting house prices could fall as soon as October.
This is when the government's furlough scheme is due to end, signalling an uncertain time for workers.
Hundreds of thousands of jobs are believed to be inline for redundancy once the State support is pulled.
Household finances have been stretched too, the full impact of which will be felt when applications for payment holidays on loans, such as mortgages and car finance deals, will come to an end October 31.
All of these factors will leave fewer people in a position to apply for a mortgage, so they are likely to stay put.
Competition among house hunters will be less, giving buyers room to negotiate a better deal.
“As many in the industry have warned, it’s likely that the growth we’re seeing in the market will be short-lived," said Miles Robinson, head of mortgages at online mortgage broker .
"Although the housing market is facing a time of uncertainty, it’s not all doom and gloom.
"If the growth we’re experiencing is temporary, many house hunters could benefit by using this time to save more towards a deposit and take advantage of a possible fall in house prices in the months to come."
Some industry insiders believe that prices will remain steady until the stamp duty holiday ends March 31, 2021.
For second-steppers and those further up the property chain competition could stay the same.
Colby Short, CEO of has said: 'We're expecting to see inflated prices for a little while whilst the stamp duty holiday is still in place.
"As buyers rush to take advantage of the discount before it ends, demand for housing is continuing to increase, and is likely to keep prices up for the next couple of months."
Leading economists predict house prices will start to fall "significantly" by the end of the year and in the first half of 2021.
Halifax managing director Russell Galley said: "It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic.
"As employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.
"While it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly.”
What does it mean for first-time buyers?
Mr Short added that he expects we will see a drop in the number of first-time buyers coming to the market in the near future.
Those looking to get a foot on the property ladder may struggle to get something affordable while prices are so high.
First-time buyers also face forking out bigger deposits in order to secure a mortgage.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa - It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.
Help to Buy equity loan - The Government will lend you up to 20% of the home's value - or 40% in London - after you've put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa - This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20% discount by 2020. To receive updates on the progress of these homes you can register your interest on the website.
Lenders have tightened their mortgage criteria and pulled almost all 5% and 10% deposit mortgage deals, known as high loan-to-value (LTV), for first-time buyers.
According to Moneyfacts, those wanting to borrow 90% for a mortgage, there are only 48 deals on offer currently, compared to 758 a year ago.
Nationwide has stopped offering home loans to first-time buyers who were gifted or inherited half of the deposit.
TSB launched a mortgage for first-time buyers in a "flash sale" that was only available for a day.
"Mortgages agreed for the coming months have plunged by a half," said Sarah Coles, personal finance analyst, Hargreaves Lansdown.
"We had expected this. The main concern for lenders is whether people are going to be able to afford their mortgage during the recession."
Mr Robinson told The Sun that the market isn't currently in favour of first-time buyers.
He said: "First-time buyers in particular are facing increased scrutiny from lenders, tighter criteria and a shrinking range of high LTV products.
"This, teamed with the recent increase in house prices, means many might get less for their money."
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That said, many sellers are looking for a speedy sale in case any further lockdown restrictions are introduced throughout winter when coronavirus cases are expected to rise again.
Buyers who are chain-free and flexible with when they want to move will be attractive to some sellers who may be willing to accept a lower offer as a result.
Luke Egan, Head of Specialist Mortgages at said: "First-time buyers may be in a great position to secure a good deal if they have a good deposit and secure employment."
First-time buyers may be allowed to access their pension early in future if they need the cash to pay for a house deposit.
First-time buyers can now get onto the property ladder with just a 1% deposit with a new mortgage from Tipton Building Society.
Boris Johnson plans to get millions of Brits on the property ladder by turning Generation Rent into Generation Buy.
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