A second wave of demand for more space will keep driving house prices across Great Britain higher, with values set to rise by up to 3.5% a year between 2022 and 2024, a forecast claims.
The estate agent Hamptons also predicted that more homes will be sold in 2021 than in any year since 2007, after a record surge in activity this year as families sought larger homes after the pandemic.
Hamptons believes that summer 2021 marked “peak house price growth”, and expects growth to slow over the next few months, so that this year would end with average prices in Great Britain 4.5% higher than at the end of 2020.
However, one of the factors widely credited with contributing to the stronger-than-expected price growth during the pandemic – a “race for space” that has seen many buyers prioritising properties with bigger gardens and more room for working from home – could be set to continue for some time.
Official house price figures, plus data from some commentators, indicated that the market had cooled after the partial end of the stamp duty holiday in England and Northern Ireland this summer.
According to the most recent data from the Office for National Statistics, the average UK house price fell by £10,000 in July compared with a month earlier, though its figures showed that annual price growth was still running at 8%. Many homebuyers had rushed to complete their purchases before a key stamp duty holiday deadline on 30 June, and official data showed that sales tumbled by almost two-thirds in July.
However, some more recent data has suggested that the market is continuing to boom, even though the threshold at which stamp duty begins returns to its pre-pandemic level of £125,000 on 1 October.
The Halifax, one of the country’s biggest mortgage lenders, said this month that the average cost of a property increased by 0.7% in August; its rival lender Nationwide put the monthly rise in August at 2.1%, the second-highest in 15 years.
Flexible and remote working and other Covid-induced changes mean households will move home more often than during pre-pandemic times, according to Hamptons. It is forecasting price growth for Great Britain of 3.5% in 2022, 3% in 2023 and then 2.5% in 2024. That would mean a rise of 13.5% between the start of 2021 and the end of 2024.
The estate agency predicts that north-east England would be the top performer over the period, with property values notching up a rise of 6.5% this year and then between 4% and 6% a year between 2022 and 2024.
By contrast, London was set to underperform the rest of the country over the next couple of years, with prices forecast to rise by 1.5% this year and 1% in 2022, said Hamptons.
Several surveys have found that stretched affordability and the rise of flexible working have prompted many households to quit the capital or consider doing so.
The stamp duty holiday was announced by the government in July 2020 to ward off a collapse in the market during the first Covid lockdown. Until 30 June this year, the first £500,000 spent on a property in England and Northern Ireland was tax-free, which meant a saving for a buyer of up to £15,000. On 1 July the tax break was scaled back, with the threshold at which the tax on property purchases begins falling to £250,000, and this so-called “nil rate band” will return to £125,000 next month. The tax break has already ended in Wales and Scotland.
Separately, the estate agent Knight Frank said the boom in demand for second homes that began after the first lockdown in 2020 was continuing as the restrictions on overseas travel had left many people wanting somewhere they could retreat to, away from the city bustle. It said its data showed that second home purchases outside London increased by 83% in the first eight months of 2021 compared with the five-year average.
The headline of this article was amended on 28 September 2021. As the main text makes clear, the forecast from Hamptons looks at house prices in Great Britain, not “UK house prices” as an earlier headline said.