It is no secret that the UK housing market has experienced significant growth in recent years. The average house price hit yet another record high in June 2022, having grown 10.7% on the average house price in June 2021. However, the trend of rampant growth is showing signs of slowing, as the rate of growth has decreased for the third consecutive month.
The slow in growth could well be light at the end of the tunnel for first-time buyers who have been priced out of the housing market in recent months – but will the slowdown stick? Here we will examine what could be in store for the property market, as well as the factors that led to such rampant increases in property value.
The Pandemic Price-Hike
The roots of the property market’s significant growth can be sourced back to the coronavirus pandemic, and government measures taken to stimulate the market in the midst of lockdown measures and reduced spending.
One key government intervention was that of reducing rates for Stamp Duty Land Tax. Between the 8th July 2020 and 30th June 2021, a ‘nil rate’ was introduced for properties up to £500,000 in value, with reduced rates for properties above. The elimination of stamp duty for the average property, and their resulting removal from conveyancing fees for property sales, was a vital incentive to stimulate property buying, saving first-time buyers up to £10,000 in additional cost.
The stamp duty intervention came at a unique time for the housing market, as demand for properties vastly outstripped supply. The specifics of the pandemic, and the introduction of remote working as a standard for much of the working population, led to something of a ‘race for space’; detached properties surged in popularity, further feeding demand and pushing prices up all the more.
The Housing Market Today
The surge in property values has endured for more than two years, even after the end of the stamp duty holiday and the end of the coronavirus pandemic. House price rises continued to be fuelled by a shortage of available properties – the result being an increase of the average property value by nearly £50,000 between 2020 and 2022. Today, prices continue to rise, but as indicated earlier, growth is beginning to fall. The housing market is showing early signs of stabilising. What do the next five years have in store?
The Next Five Years
The housing market is predicted to cool slightly for the next five years, but still exhibit robust growth. Demand for housing will be somewhat lessened by the increased construction of new-build housing, but additional costs will be produced by legal requirements to adhere to new environmental standards. The Future Homes Standard applies from 2025, required significant decreases in emissions – adding costs to building and slowing rampant value growth.