Why are house prices rising when everything else in the economy is going wrong?

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While the country has been hit by its worst recession since records began, and thousands of people are losing their jobs – one industry seems to be weathering the coronavirus storm better.

Figures released by the ONS reveal that in the year between July 2019 and July 2020, average house prices in Wales increased by over £12,000 or 3.6% to £170,000 – the highest percentage increase across the UK.

And despite the threat of Brexit and the shutdowns of entire industries, the housing industry is facing an “unprecedented demand” according to estate agents.

Not only is there more demand for houses, data from the Office for National Statistics shows that despite the economic downturn, property prices are on the increase across every part of the UK.

So, why are house prices continuing to rise when other parts of the economy seem to be failing drastically? And can it possibly last.

One property expert, David Westgate, Group Chief Executive at Andrews Property Group, believes it cannot. He fears the stamp duty holiday, working from home and low interest rates have propelled an unsustainable boom, describing the property frenzy as “the bricks and mortar equivalent of the last days of Caligula”.

Yet others are not so sure.

Has lockdown changed what people want in a property?

Perhaps an obvious answer, but the UK-wide lockdown had a huge affect on the type of property people are now looking for.

In Wales, according to ONS figures, houses priced between £109,000 and £149,999 have consistently been the most popular choice.

However in June – after three months of lockdown – there was a sudden shift in the number of properties sold between £150,000 and £199,999. This price range was the most popular in July 2020.

After months of being restricted to their homes, with many working from home, estate agents across Wales say that a garden or office space has now become a precious commodity.

Typically, these properties would be more expensive than a flat or a smaller property for example.

Bradley David, the director of Chambers agency in Cardiff says that demand is currently outstripping demand for such properties – and in turn driving the price up.

“There’s an unprecedented demand for certain properties – especially ones with things like gardens or space for an office,” said Bradley

“At the moment, a property like this will have dozens of viewers on a Saturday. A property with a garden at the moment is almost guaranteed a sale.

“Demand is just really high at the moment, and to be honest there’s actually not enough of a surplus of properties to meet it so every house is just getting a lot of interest.”

In turn, this increased demand is driving up offers, with people now prepared to pay more for a property that meets their requirements.

“I’d say the biggest thing is people now seem to be skipping a step. People seem to be going from perhaps a flat to a three or four bedroom house – it’s almost as if they’re planning for this to be something a bit more long term.

“I think offers are definitely being met more now. I had one property go for £25,000 over it’s asking price – but obviously that then has problems of it’s own with the banks asking questions,” he said.

Has working from home meant the end for city centre living?

In March, almost overnight, millions of workers found themselves abandoning the office and morning commute in favour of home working.

But how much of an effect has this had on the property market seven months on?

Housing market analyst & commentator Neal Hudson says that people are “re-evaluating” what they look for in a property, which could explain why house prices are continuing to rise.

“In previous recessions the housing market has either been directly responsible for causing it or has at least been implicated – this time that’s not the case,” said Neal.

“It’s also important to look at how the pandemic has affected different people.

“You’ve got some people who have lost jobs and incomes and on the other side you have some people who have actually saved by being stuck at home and not spending – both outcomes have affected the housing market.

“Around 1.2 million transactions are carried out every year, which is comparatively small when you think that there’s something like 26m million properties across the UK.

“When you break that down to a local level, it could end up being the case that even just 10,000 more transactions in a particular region could drive up the prices.”

Neal says that whether it be location, or need for more space, lockdown has sped up the process for buyers.

“It’s less about the usual property mantra of “location, location, location” and now more like “location, location, space”

“With more and more people working from home, people are now finding less of a need to be near a train station or a motorway.”

Unsurprisingly, according to Zoopla, average house prices in Cardiff currently stand at £249,382 – nearly £70,000 above the Welsh average.

With less need to be in city centre offices, and with cheaper homes elsewhere, is this the end of city centre living?

Gareth Jones, owner of Penhill Jones Properties, based in Rhondda Cynon Taf says that there is currently a huge demand for homes in the area.

So much so, almost all of the properties he advertises are sold within five days.

“I’ve only been in the business for around three months but to give you an idea of the demand, at the moment around 98% of my properties are receiving an offer within the first five days, and 97% are going for asking price,” he said.

“I’ve sold properties to people from London, Cardiff and Bristol – I think perhaps there is a bit more of a draw to this area currently.

“With the changes to the train lines it’s really easy to get into Cardiff now if needed.

“But we also have a lot of local interest too – I think RCT and the valleys have the potential to have a lot of value.”

Is lockdown the reason for the coastal housing boom?

According to RightMove, coastal areas in Wales have reaped the benefits of the housing boom more than most.

In September 2020, Sales agreed across Wales were up 48% from the same period last year, with the number of people contacting agents through rightmove up by 59%.

Of this, coastal areas had by far the highest increase in sales between September 2019 and September 2020

For example, over that period House prices in Swansea (including the Gower) were up by 129%, Pembroke up by 96% and Milford Haven up by 60%.

The increased interest in these types of properties could be one answer for the price boom, with homes in this area typically more expensive than the Welsh average.

Martin Jones a residential sales manager at JJ Morris estate agents says that demand has meant property offers are now being met – rather than reduced.

“For us here, I don’t think it’s necessarily the case that prices have gone up, but that there’s more demand,” he said.

“So for example, before a £150,000 house you’d usually be able to accept offers for a bit less but now they are going for the asking price.

“If anything has gone up it’s the ‘sale agreed’ price has gone up rather than the asking price.

“It’s a supply and demand situation, I think if lockdown is given us anything it’s a better perspective of what we want from a property.”

How has government help boosted the property market?

In June 2020, the Welsh Government announced a holiday on the tax paid on house sales for homes worth less than £250,000 until March 31, 2021.

The threshold for the Land Transaction Tax, which replaced Stamp Duty in Wales in 2018, was previously set at £180,000.

And while the average Welsh property currently coming in at £170,000 this higher threshold could be pushing people towards buying more expensive properties.

Analyst Neal Hudson said that the summer period – since this announcement – has been particularly busy but is now leveling out.


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“I think the stamp duty holiday has had an effect too,” he said. “It’s pushed people who were already perhaps thinking about moving to make the jump.

“As we’ve seen with these things before, there was a bust of activity when it was first announced and it’s still early days but the summer boom seems to be easing to more normal levels.

“I think we’re predicting a big spike in March where people rush to meet the deadline.”

Will prices continue to rise? What does the future look like for the housing market?

While coronavirus has consumed people’s lives for most of the year, Brexit is also still pressing ahead in the background.

Neal says that property experts are already trying to forecast how this will affect the property market.

“The truth is absolutely nobody knows how the market will pan out. With lockdowns and restrictions things could change from month to month.

“Then there’s also things like Brexit that add to the uncertainty. I think there’s a distinct possibility that we could see a crash next year.

“The economy was underperforming before the pandemic. Brexit is certainly in the back of mind even though it’s not yet exactly sure what costs and benefits it will bring.”

However Neal does think that the trends triggered by the pandemic could be a long term change.

“There’s been a clear shift towards bigger homes, and the already expensive market has been seeing more interest.

“I think you can see the location trend most in somewhere like London where it is considerably quieter.

“I think the single biggest thing that is driving the increase is revaluation. People are now looking for desirable homes in desirable locations and re-evaluating what they want.”



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