2020 has been a year that most will remember for the pandemic, but it’s almost made records for more surprising reasons. Despite the global economic downturn house prices have risen at their fastest rate for over 6 years, and the average time it takes to sell a home is now just 50 days, the fastest ever since records began, according to online property site Rightmove. We also have a massive increase in mortgage approval rates, which are at their highest since the last global economic crisis in 2008.
These surprising facts give rise to a couple of very obvious questions to those who currently own property in the UK, or indeed intend to do so in the near future.
First of all, why are house prices continuing to increase when jobs are under threat and lenders are being notoriously picky who they lend to?
Secondly, which regions in the UK are enjoying the fastest growth, and again what are the reasons behind this?
The first question is one that has been posed by many inside and outside of the property industry, as increasing property prices alongside record mortgage applications seem to be the opposite of what we should expect. The simple answer to this lies in the very thing that everyone has been talking about this year – the coronavirus. Or more accurately, the response of the UK government in designing economic stimulus to ensure the economy is protected during the pandemic.
The Chancellor’s stamp duty holiday, a relief in the tax paid by purchasers when buying a property under £500,000, has created a rush to beat the deadline for the tax relief at the end of March 2021. This demand, alongside a shortage of premium quality housing, has meant that prices have been pushed up as sellers can be pickier about which offer they accept. Although demand has slowed since the lead-up to Christmas, property prices continue to grow.
The second question, around where the highest growth exists in the UK, has some surprising results. The obvious answers would be the areas that have the highest population density and logically the most demand. Wrong. Areas like London, Manchester and Birmingham have had modest growth, but nowhere near as much as more rural areas, in particular those properties in or even near to national parks.
Nationwide Building Society, one of the largest mortgage lenders in the UK, publish a monthly housing report about what prices are doing, alongside observations for any trends. This is what their Chief Economist, Robert Gardner, had to say this month.
“In recent months we have highlighted how housing preferences have been shifting as a result of the pandemic. Our market research suggested that nearly 30% of those considering a move were doing so to access a garden or outdoor space more easily, with 25% looking to get away from the hustle and bustle of urban life.”
The report went on to say that property located within a national park, like the South Downs in England or The Cairngorms in Scotland, had nearly a 20% premium on the price. Even properties located within 3 miles of these parks had a 6% premium, making them an attractive prospect for growth due to desirability.
Andrew Harvey, a senior economist at Nationwide, also said;
“Those living in the parks can make the most of the great outdoors with a range of activities on their doorstep. Development is also controlled, with limited new housing construction, which also helps to explain why prices tend to be relatively high.”
Although the most desirable locations have the best potential for growth, they also have higher barriers to overcome because of the price required to buy them today. Given that lenders have become more cautious about the amount they will lend, it is vital to ensure appropriate advice is sought to properly ascertain the level of borrowing that is available.
Smartr Finance enjoy strong relationships with lenders whereby they can determine the level of borrowing you can achieve quickly and easily to avoid the risk of disappointment.