House prices are an important indicator of the health of a country’s economy. In the past year, a shortage of properties for sale and booming buyer interest has created a highly competitive market. Short supply is fuelling a growth in house prices which hit a record high in March amid an extension of the Stamp Duty holiday. Express.co.uk spoke with several property experts to discuss the future of the property market.
British house prices have hit a record high despite rising at a slower rate than one year ago, according to the Halifax house price index.
Halifax said the affordability of houses had reached “close to pre-financial crisis levels”.
The average house price has remained at a historic high at £252,765.
Mortgage rates are considerably lower compared to the 2007 financial crash.
In 2020, the average house price was at £252,030 and inflation has climbed by 5.7 percent.
This rise was down from a near five-year high of seven percent last year, according to the lender.
Prices only rose by 0.3 percent in the first quarter of 2021, which is smaller than the jump of 2.5 percent in the final quarter of 2020.
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The standard house price in Greater London is £505,359, which is down 2.5 percent from the final quarter of last year.
Raj Dosanjh, the founder of agent comparison website Rentround, said London is the most expensive city for buyers.
He told Express.co.uk: “London remains the most expensive region of course, with the average house price £362,309 above the national average.
“Outside of London, the most expensive places to buy property are Slough (£494,419), Guildford (£437,521) and Chelmsford (£419,354).
“All of these regions have easy access to London and have a range of historical monuments, including castles and medieval churches.”
Mr Dosanjh added: “The three cheapest areas to buy a property are all located in the North East with the average property costing less than £140,221, made up, in order of lowest, by Sunderland, Durham and Darlington.
“A combination of job prospects, weather (compared to more southern areas of the country) and a lack of investment in the regions are the core reasons.”
Newquay has been named one of the most desirable areas, according to property portal Rightmove.
The property platform said eight out of 10 listed homes have sold, subject to contract, since the beginning of 2021.
This high rate of sales indicates Newquay is the fastest growing market in the UK.
By comparison, Birmingham city centre has the worst track record with sales, with just 18 percent of properties sold so far this year.
Duncan Kreeger from property bridging loan company TAB said areas with more outdoor space and larger sized homes have been popular.
Mr Kreeger told Express.co.uk: “The outskirts of Leeds, and Croydon both provide properties with the outdoor space and size people want having spent a year working from home.
“Both areas are well connected into the city centres so as flexible working becomes the norm, people can still access the offices should they be required.
“I expect to see areas around Birmingham to also increase due to the demand of property as a result of HS2 and the migration of certain global companies headquarters, like HSBC and Deutsche Bank and BT.”
He added: “Areas that the Halifax House Price Index indicated to have the lowest house prices are Lincolnshire, areas in County Durham and South Wales.
“It’s possible to link the quality of infrastructure into the closest cities and the lower house prices.
“We’ve seen the demand for outdoor spaces and larger property increase, but people still need to have the access to work and the infrastructure might not be there.”
Holly Herbert, spokeswoman for webuyanyhouse.co.uk said the past year has seen an increase in homeowners relocating.
She told Express.co.uk: “So previously the highest house prices were in London, as the capital – but we are seeing homeowners relocating, especially with working from home being the new norm and giving people more freedom with where they live and not restricting them to a certain commute timing.
“It’s probable that this will start to affect house value in the city, however, I don’t foresee it to be a hugely dramatic fall as there will almost always still be buyers interested, providing they can afford the value, and as things start to return to normal I would expect the demand in the city to increase again.
“More rural areas are starting to see an increase in value though as they are now more in demand than ever, with huge amounts of people wanting to move out to the countryside and make the most of the space that it offers that doesn’t come with inner-city living, and with demand comes a price.”
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Will house prices fall in 2021?
Mr Dosanjh said the lingering impact and cost of coronavirus will have a massive impact on house prices.
He told Express.co.uk: “All signals point to prices across the country dipping in 2021.
“Firstly the true cost of COVID-19 will be felt.
“As business recovery takes time and furlough ends, rent will generally fall as people struggle to make ends meet. As a result, this will reflect in property prices.
“Furthermore when stamp duty is brought back in, properties will become more expensive to purchase.
“Coupled with a dip in potential rental income, buy to let investors will be deterred which will impact property prices.
“London, in particular, is at risk of seeing negatively impacted prices.
“There is the risk that the estimated 700,000 foreign nationals that left the city, eight percent of the city’s total population, may not return.
“In addition, newly adopted working from home practices results in less importance of living near trains/the tube or close to the city.
“While this will improve prices outside of London & possibly in greater London, inner locations are likely to suffer.”
Ms Herbert agreed property values will likely drop in 2021.
She said: “Overall, I do expect some property value drop in 2021 – I think the end of the furlough scheme will have an effect even if businesses are opening up again, as it’s likely that there will be reductions in staff while there are limits of customer numbers inside different areas.
“Buying a house is one of the most expensive purchases most of us make, so that will be the first thing that halts – as well as there being a huge amount of people who were saving to buy who have now had to live off their savings, reducing the demand and therefore slowing the market.”
Ben Gent from property investment platform Assetz Exchange agreed the pandemic is likely to affect house prices across Britain.
He told Express.co.uk: “The pandemic has seen a push towards larger properties with outside space as people act in response to the lockdowns endured over the past 12 months.
“This has seen a depression in prices for flats with no outside space while spacious houses with gardens have seen strong demand.
“We believe that with the success of the vaccine rollout and the suppression of the virus that the canny first-time buyer/investor can look to snap up city centre bargains as life returns closer to something resembling normality.
“Much has been written about the death of city centres and city living but we feel that the appetite for people to live life to the full in a thriving city will be as strong as ever and expect a quick repopulation as things continue to open up.”
However, Mr Gent believes there is likely to be a continuation of increased demand in the coming year through to next year, which could see house prices continue to flourish and grow.
Mr Gent told Express.co.uk: “In our view, there is an extremely strong tailwind for house prices for the rest of 2021 and into 2022.
“There is a continuing excess of demand over supply which no recent government has been able to address and this will continue to act as a prop for house prices whatever develops in the economy.
“Added to that, interest and mortgage rates look set to remain low for years, even as inflation increases.
“The stamp duty holiday has been extended and the government is set fair to continue supporting the economy and markets with fiscal and monetary stimulus.
“We also feel that international investors will have taken note of the outstanding vaccination rollout the UK has undertaken outside the straightjacket of the EU and are likely to gradually come to see that Brexit is not the disaster many commentators have painted it to be.
“This will see an increase in incoming investment boosting house prices, the pound, UK equities and UK asset prices in general.”
Mr Kreeger said one aspect which could impact property prices is increased demand for surveyors and other required property assessments.
He told Express.co.uk: “Certain types of property prices are being impacted negatively.
“Thousands of buildings are still on the waiting list for additional fire assessments and EWS1 forms.
“These additional safety requirements are required for particular buildings, when homeowners look to sell or remortgage properties, many are finding it difficult to gain an ESW1 form that is now required.
“There’s a distinct lack of surveyors who are qualified and they cannot meet the huge demand so I think we’ll see this continue to have a negative impact on the price for this type of housing.
“Looking at the house prices as a whole though, I think we will see it rise throughout 2021.”