What’s happening with house prices?

If you’re thinking about buying or selling your house, you’ll be keeping a close eye on house prices, which have been rising following the coronavirus lockdown, but experts predict this won’t last.

House prices are currently rising at the fastest pace since September 2016, according to the Nationwide Building Society, and rose 5% to an average of £226,129 in September. But if you’re looking to buy or sell is there ever a right time to make the leap? Here we explain everything you need to know about house prices to help you make the best decision for you.

What is the average house price in the UK?

The coronavirus pandemic has had a significant impact on the UK economy and especially house prices, as during lockdown it wasn’t possible to move to a new house.

Since the easing of lockdown, the market has been reopening and house prices have been rising. 

A temporary cut to stamp duty has also helped. Buyers can now potentially save up to £15,000 in stamp duty if they move before July 2021. 

A spate of ultra-low mortgage rates have also given the housing market a boost and prices rose 0.9% in September, from August, according to Nationwide. This follows on from a 2% jump the previous month. 

There are a number of different pricing indexes which record house prices. The following are the main publications available, which all work in a slightly different way. 

Whether you are buying or selling, having as much information as possible about house prices will give you a clearer idea of how to act. Therefore, it’s always worth checking a few different indexes regularly.

  • Nationwide and Halifax, two of the largest mortgage providers, publish monthly statistics based on mortgage approvals. Halifax’s latest report also recorded a record jump in prices last month, putting the average price at £245,747, a rise of 1.6% from July and 5.2% from the previous year

  • The Land Registry records actual house sales and its latest data for June puts the average house price at £237,834, rising 2.7% monthly and 3.4% compared to June 2019

  • The Bank of England also publishes data on mortgage approvals and recently reported that approvals in August had risen to their highest level in almost 13 years to 84,700 in August from 66,300 in July 

  • The Royal Institution of Chartered Surveyors (RICS) also publishes data on house prices. It speaks to its members who are estate agents and valuers to see if they are seeing rises or falls, rather than recording actual sales.  

  • If you want to drill down to local prices, Zoopla lists all UK homes with the most recent data for house sales. Where there is no available data, it uses an algorithm looking at other property sales and characteristics of the local area to predict the price.   

What will happen to house prices next?

It’s impossible to know what will happen next with house prices but experts use historical data and current economic events to predict what might happen.

Prices have had a significant boost in the past few months, but most experts agree this is likely to be short lived. As the government’s furlough scheme comes to an end, more people are expected to be made unemployed. 

Household earnings have also been reduced by the coronavirus pandemic, which shows no signs of stopping. Both of these factors are likely to have a big impact on the market because they mean fewer people will be in a position to move house.

An easy way to know where you stand is by using a mortgage calculator to find out how much money you need. 

Is it cheaper to rent or buy a house?

Traditionally it’s always been cheaper to buy a house, because despite the upfront costs of a deposit, the monthly figure in mortgage repayments tends to be lower than average rental costs. 

Plus if you are buying a house you will own it eventually and at which points stop paying, rather than paying a landlord if you’re a renter.

Rental rates have been rising over the past year, and as with house prices there are a number of different indexes recording them.

If we take the HomeLet Rental Index for example, which is one of the most comprehensive, it records the average rent in the UK at £987 in September which is a 0.2% rise monthly and a 2.1% rise annually. When London is excluded from this the amount is £828, a 0.4% monthly and a 3.9% annual rise.  

However, there are lots of things to consider here. With rising house prices and rental rates, many people aren’t able to save enough money to buy a house and have no other option but to rent a property.

While rental prices may be higher than mortgage costs there are some advantages. These include the landlord or estate agent being in charge of the upkeep of a house and fixing anything that breaks. 

For example, if there is a flood or fire in the property it’s up to the owner to pay and fix this, rather than the tenants. Whereas if it was your own home you would have to find the means to pay for this.

However, there are also numerous cases of landlords not paying out and tenants being left in poor-quality properties without many options. The charity Shelter has lots of help and advice for anyone having problems in a rented property and it is a good place to start if you find yourself in this situation.

How to negotiate a house price

How much you can negotiate when buying a house will depend upon your own circumstances and the house you’re after. However, the following apply in most cases:

  • Find out how long the house has been on the market

  • Research local house prices, both in the current year and the past few years

  • Ask if the asking price has dropped at all since it was first listed on the market

  • Ask if anyone has already made any offers on the property - note an estate agent doesn’t have to provide this information

  • Find out how many agents are selling the property: if several are, the agent showing you around could be more willing to drop the price to guarantee a sale

  • If the seller wants to move to a new house fast, they might be more willing to negotiate

  • If you can show you are ready to move quickly and easily, such as first-time buyers without a chain, this could work in your favour

How much have house prices risen in the last year?

Using the data from Nationwide, house prices have risen almost everywhere in the last quarter and the last year overall, as you can see from the table below.

NationAverage price in Q3Annual % change this quarterQuarterly % change
Wales £165,4233.8%2.4%
Northern Ireland£146,1521.5%1.4%

How can I add value to my house?

If you’re not ready to move straight away and you’re looking to add value to your property, there are a number of ways to do this. This could also be a good way to boost the amount of money you might get when selling, depending on how long the work takes and the current housing market conditions.

As with any building work, always factor in the cost of labour as this can make a big dent in your budget. 

The precise value depends upon the property, the local market, and your own circumstances, but the following is a general list of some of the elements that can boost a property’s value:

  • Rewiring old houses

  • Improving an existing heating system

  • Decorating

  • Sorting out structural issues such as damp, broken roof tiles, or cracks

  • Upgrading to double glazed windows

  • A loft conversion

How can I find out what house price I can afford?

National data is a good way to see what is happening with house prices. It shows how they have changed, on a monthly and annual basis, and can give an indication as to what will happen next. 

How much you can afford to pay for a new house will depend upon your own personal circumstances. 

If you’re a first-time buyer, for example, you’ll need to calculate how much of a deposit you’ll need compared to the mortgage amount. While if you already own a property, you’ll need to find out how much value, or equity, you have already in your existing home.

Coronavirus update for mortgage borrowers

The Financial Conduct Authority (FCA) confirmed that homeowners whose finances have been affected by COVID-19 can apply for a 3-month mortgage payment holiday, which can be ‘topped up’ to a total of 6 months. 

Homeowners unable to make their mortgage payments who have yet to apply for a payment holiday have until 31 March 2021 to do so. Mortgage payment holidays ease the burden of having to make monthly payments at times when you may be struggling to make ends meet. The holiday will not appear on your credit file and won’t affect your credit score, however lenders will still be able to find out about it. 

You should only take a mortgage payment holiday if you really need to. This is not free money – it is simply extending the term of your mortgage by 3-6 months. Your home loan will continue to build up interest during this time, meaning the total amount you will pay back over the term of your mortgage will be higher.

10th October 2020