House Prices: Will They Fall?
This week, a number of sources have speculated over what lies ahead for the UK property market in 2021, with many suggestions of an upcoming market crash.
The news comes following Halifax’s latest House Price Index, which stated that the average house price fell by £1,284, from £261,642 in May to £260,358 in June. According to the statistics, the average property price fell by 0.5% in June, which is the first price drop the UK market has seen since January of this year.
Prior to June, we saw a significant increase in house prices across the country, with the prices of properties rising in some regions by as much as 12%. Overall, property prices have risen across all parts of the UK in recent months. So, what has been the cause of this sudden market growth?
Stamp duty holiday sends market mad
The coronavirus pandemic coupled with the stamp duty holiday in the UK has driven the market to recent heights. After prolonged periods of being in lockdown and a national shift to remote homeworking, home buyers have been reconsidering what they look for in their homes. The need for additional space to work and live in has caused many homeowners to uproot from urban areas and relocate to the suburbs or countryside. Since the first UK lockdown in 2020, people’s priorities have shifted, so much so that they have been willing to relocate in order to gain extra garden and more space for their money.
In addition to this, the stamp duty holiday has been another contributing factor to the recent surge. Homeowners who were only just gathering their initial thoughts about moving, have been prompted to move more quickly to benefit from the reduced stamp duty. And it’s not just residential homeowners who have been selling and buying during this climate; buy-to-let investors have also been taking advantage of the hot property market by cashing in on some of their portfolio.
Supply and demand have driven the property prices up. Landlords have recognised the recent demand for properties and have therefore been selling some of their investments to take advantage of the inflated prices.
Another cause of the recently inflated house prices is the lower-than-usual interest rates on offer, and the introduction of mortgage schemes such as the 95% mortgage guarantee scheme.
There have been many factors influencing the rise of house prices. Now of course, the question is will prices continue to rise or will they fall?
Have property prices really begun to fall?
We can’t argue with the data. The Halifax House Price Index clearly shows a decline in property prices of late. However, despite a slight decline, average prices remained higher in June 2021 compared to figures from June 2020. And, on the whole, property prices have remained at record-breaking highs.
So, is June the starting point for a property price decline? Some property experts have predicted that a crash is coming, whereas others aren’t so certain and believe the market will steady.
If the last 12 months have taught us anything, it's that anything is possible. We’ve seen the UK housing market defy all expectations and recover quickly to sudden economic change. However, while some property experts have confidence in the continued strength of the market, others have different views, suggesting that the housing ‘bubble’ will soon burst.
Is the UK about to experience a crash in the property market?
As with any market, prices fluctuate, and property is no different. Many argue that rapid growth and incline will inevitably be followed by a sharp decline. Fingers have been pointed at the UK government for inflating prices ‘artificially’ by way of the stamp duty holiday and mortgage guarantee schemes.
On average, properties increase in value each year. That said, markets also crash every so often, and with the last significant crash having happened in 2007-2008, some experts are concerned that another is on the horizon.
Whether or not this will happen is yet to be seen. Was June simply a brief plateau, or the start of a market crash? Only time will tell.
