UK house prices increased by record numbers in 2020. Data from Nationwide shows the year saw house prices growing by 7.5%, the highest growth rate for six years.
The year ended strongly for UK house prices, with the average property value in the UK £230,920 in December, 0.8% higher than in November. The UK property market showed resilience throughout 2020, which has been a year marked with turmoil. Despite the Covid-19 pandemic and two national lockdowns, UK house prices ended 5.3% higher than they were in March.
Experts believe the pandemic’s impact on people’s daily lives helped stir continued growth in the housing market. Lockdowns and the need to work from home inspired many people to look for new housing. People wanted more space to make their time at home a little more convenient and pleasant.
Policy measures help boost housing prices
A raft of policy measures further supported people’s growing interest to buy. Both the furlough and Self Employment Income Support schemes ensured the labour market had support, said Nationwide’s chief economist, Robert Gardner. He also highlighted the stamp duty holiday, which stimulated demand and the high number of mortgage approvals.
The housing market also benefitted from lenders offering payment holidays to borrowers. These mortgage holidays allowed people to stay in their homes rather than being forced to sell. On top of that, mortgage rates have been competitive and first-time buyers have jumped at the opportunity to get on the housing ladder.
Future growth not guaranteed
House prices could face a more challenging time in 2021, however, and the long-term outlook remains uncertain. How prices develop next year depends on how the pandemic continues to disrupt the UK economy. Aside from the measures to contain the virus, the housing market's health also depends on the policy measures implemented to limit the economic disruption. Questions regarding Brexit’s impact on the UK economy remain open despite the last-minute deal.
Analysts warn rising unemployment levels could pose a threat to property values. In the meantime, the stamp duty holiday will continue to provide a short-term boost to the market, although the policy is set to end in March. It could continue to drive an increase in house prices at the start of the year, as people rush to take advantage of it. Still, the end of the policy could dampen people's desire to buy.
Behavioural shifts are also something to watch out for in the coming months. The pandemic has changed people’s views on many things, including their living spaces. Earlier this year, a Savills survey showed that 49% of buyers prioritise space, with 71% of younger buyers interested in more outdoor space and rural locations. The desire to find bigger homes away from busy towns and cities could keep the housing market active.