UK Housing Market – 3 Years On Since The Pandemic

In the housing market, we’re often focused on looking ahead, trying to predict what’s going to happen in the future and how the market is going to change. However, we’ve now hit another major milestone since the Covid-19 pandemic, and three years on it’s good to sit back and reflect on how things have changed and how we’ve got to where we are now.

When the COVID-19 pandemic hit

First of all, let’s look back to where it all changed for the UK’s housing market. Like many industries when the UK went into lockdown in March 2020 the UK’s housing market was completely shut down. Many experts would have predicted that this unexpected closure would have resulted in a drop in demand – yet, surprisingly it had the opposite effect.

Lockdown changed people’s attitudes on how they valued their space – from people living in flats with no gardens to families living in mid-sized family homes in the suburbs. The trend that gripped a hold of the nation was ‘the race for space’.

For the many that were now ‘working from home’ the need for at home office space saw spare bedrooms converted into a new headquarter and garden sheds turned into ‘man caves’. But these were simply temporary measures and that desire for extra space fuelled a thirsty market of house buyers looking to get away from city life in exchange for rural living.

House price growth to date

Since the pandemic house prices have been growing on an upward trajectory. Based on the Land Registry’s House Price Index:

  • The average UK house price was £247,355 in January 2019
  • The average UK house price was £290,000 in January 2023
  • This is an increase of £42,645 in three years

Surprisingly this ongoing increase didn’t do too much to deter house buyers that managed to save during the pandemic and that were able to capitalise on the historically low-interest rates and Stamp Duty Land Tax (SDLT) holiday at the time.

Industry insights

It’s not just us that have become nostalgic over what’s changed across the housing market over these last three years. A recent report by Halifax has also shared some market insights into how the landscape has changed. The report said:

Heading into the pandemic, the rate of annual house price inflation for detached properties was relatively sluggish compared to other property types (at +1.7% in January 2020 versus +4.1% for flats), with buyers perhaps less willing to pay a premium.

Fast-forward just a few months and everything had changed. Suddenly there was surging demand for larger homes. This was driven by a number of factors, but foremost was the race for space, as prospective buyers sought bigger properties, often in more rural areas. This was in response to the radical changes to people’s lifestyles and working habits brought about by lockdown.

By the start of 2021, annual growth for detached homes had jumped to +9.2%. Fuelled further by cuts to Stamp Duty, across the UK, the average price of a detached home rose by +25.9% or £93,345 between the start of 2020 and the end of 2022. This compares to just +8.8% or £28,757 in the three years prior (January 2017 to December 2019).

Looking at the pace of growth, Wales saw the strongest house price inflation for detached houses over the last three years, up by around a third (+33.8%) or £86,675.

In cash terms, five UK regions – Eastern England, Greater London, South East, South West and West Midlands – saw the average price of a detached property rise by more than £100,000.

Kim Kinnaird, Mortgages Director, Halifax, said: “The pandemic transformed the shape of the UK property market, and while some of those effects have faded over time, it’s important we don’t lose sight of the huge step change seen in average house prices.

“Heightened demand created a much higher entry point for bigger properties right across the country, and that impact is still being felt today by both buyers and sellers, despite the market starting to slow overall.

“Taking detached houses as an example, average prices remain some 25% higher than at the start of 2020. Even if those values were to fall by 10%, they would still be around £50,000 more expensive than before the pandemic.”

What’s happening now?

While house prices remain historically high they aren’t growing at the rate that we’ve previously seen, with January’s average house price of £290,000 being a slight drop from the December 2022 rate of £294,000.

With the shockwaves that the September ‘mini-budget’ created starting to settle down, many lenders have reduced their fixed rate mortgage deals to reflect a more ‘stable’ market.

Rightmove’s property expert, Tim Bannister, says: “The beginning of the spring season sees a more settled market as it recovers from the turbulence at the end of 2022.”

And these positive signs may mean that those who put off moving home during the incredibly busy housing market of 2021, and part of 2022, are now ready to make a move.

“Higher mortgage rates and wider economic factors have raised challenges for some home-movers. Many faced bidding wars for homes during the past two years, but this slower-paced market now gives people time to plan and secure their next move as we enter the traditionally busy spring-buying season,” Tim adds.

According to Zoopla, over the last 3 months, the most sought-after property type was a 3-bed terraced house, with a tenth of all buyers expressing an interest in buying this style of property. 3-bed terraces offer a unique balance of indoor and outdoor space at an accessible price. On average, terraced houses are 16% cheaper than semi-detached houses – a key factor for value-conscious buyers.

In addition, flats are also becoming more popular after a slower period for this segment of the market.

While it’s unlikely interest rates will reduce dramatically, the positive news that the UK should avoid a recession, and gas wholesale prices are coming down meaning the cost of living shouldn’t continue to rise should give those looking to buy some breathing space. If the pandemic has taught us anything is that people can adapt even in the most extreme of circumstances.

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