The average home price in the UK reached a record of more than £250,000 on pent-up demand and families wanting larger spaces, but one of the drivers of rising prices – a temporary tax holiday on property transactions – is set to expire in March and which may lead to a house price drop.
The average house price in the UK increased by 8.5% year-over-year in December 2020 to an all-time high of £252,000 ($350,000), the nation’s Office for National Statistics (ONS) said on Wednesday.
The December jump was the highest annual growth rate seen in the UK since October 2014.
Wales saw the largest annual jump in house prices over the year (10.7%), while Northern Ireland had the smallest increase (5.3%).
Within England itself, the North West witnessed the highest annual increase in average house prices (11.2%), while London saw the lowest (3.5%).
The price of detached houses jumped by 10% over the year, double the price increase for apartments, bolstering evidence that families are seeking larger spaces during the pandemic.
A property tax holiday that has buoyed housing sales is set to expire in March.
The ONS attributed the recent price increases to pent-up demand in the wake of last year’s first lockdown, changes in housing preferences since the pandemic (families seeking larger properties away from urban areas) and a temporary cut in property transaction taxes. Meanwhile mortgage approvals for house purchases, (which indicates future lending activity,) reached 103,400 in December 2020, well above the pre-pandemic February 2020 figure of 73,400, according to the Bank of England. Housing sales were also buoyed by the government’s decision last year to suspend the tax paid on property purchases, However, this tax holiday is expected to expire on Mar. 31, 2021 across the country.
What To Watch For
If Chancellor Rishi Sunak does not extend the property tax holiday – also known as the “stamp duty” — some housing experts think house prices may begin to slow down or slump. Anna Clare Harper, chief executive of asset manager SPI Capital, told the BBC: “When the temporary stamp duty reduction ends, we’re likely to see a slowdown in house price rises.” The Telegraph reported recently that Sunak may extend the tax holiday by six weeks through mid-May in order to help tens of thousands of home buyers complete their house purchases. Rightmove, a UK online property website, warned that if the tax holiday expires as scheduled, some 100,000 housing transactions could collapse, thereby precipitating a drop in housing prices.
$713,000. That’s the average price of a house in London, a new all-time high, making it the most expensive place in the UK for housing.
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