There is no denying that the past year has been tumultuous, to say the least. The COVID-19 pandemic has caused an enormous amount of disruption in every aspect of our lives, and this has naturally led to us wondering what the future might look like in a world recovering from, and learning to live with, the COVID virus.
One of the most talked-about topics is how the housing market will look in the next 12 months, and as expert installers for home improvements in Yorkshire, we have had our finger on the pulse.
Current house prices: what have we seen from 2020 – 2021?
Despite being one of the most economically turbulent years in living memory, 2020 ended with UK house prices at a record high. According to the latest Government UK house pricing index summary, UK house prices increased by 11.8% in the year to September 2021, up from 10.2% in August 2021. On a non-seasonally adjusted basis, average house prices in the UK increased by 2.5% between August and September 2021, compared with an increase of 1.1% during the same period a year earlier (August and September 2020).
This surprisingly large increase was partly due to the stamp duty holiday introduced by the Chancellor to prevent a house price collapse, and there is no doubt that this worked.
As an overview, the latest index states that house price growth was strongest in the Northwest where prices increased by 16.8% in the year to September 2021. The lowest annual growth was in London, where prices increased by 2.8% in the year to September 2021. Here in South Yorkshire, our housing prices saw an increase of 11.9% compared to 2020. The table below is taken from the September index for UK house prices published by the Government on 17th November 2021:
The stamp duty holiday: what is next now the holiday has ended?
As mentioned above, during the COVID lockdown in 2020, the Chancellor introduced a stamp duty holiday. Between July 2020 and June 2021, there was no tax to pay on the first £500,000 of property purchases in England and Northern Ireland. This meant that buyers could save up to £15,000, which was hugely attractive and helped to keep the housing market buoyant during such unprecedented times. It could be argued that this stamp study holiday was what saved our housing market from another 2008-style collapse. The holiday ended on the 1st of October this year, which begs the question, what will happen to the housing market now?
As of October, homebuyers now have to pay stamp duty in England and Northern Ireland at the levels that were in place before the holiday was introduced.
This means the thresholds are:
|Property value||Stamp duty rate|
|Up to £125,000||0%|
|The portion between £125,001 and £250,000||2%|
|£250,001 and £925,000||5%|
|£925,001 and £1.5 million||10%|
|Above £1.5 million||12%|
According to The Times Money Mentor, it’s thought that the end of the stamp duty holiday could see a dip in house prices. This is because there will be less demand from people wanting to take advantage of the tax saving. Housing experts say the stamp duty holiday contributed greatly to the big rise in house prices seen during 2020 and 2021 as people rushed to buy before the deadline.
The supply and demand problems the housing market is currently facing
Another factor affecting our housing market is supply and demand. According to Get it Sold, there was a huge 56% demand in increase in August 21 compared to August 19. There has also been a 24% decrease in the supply of homes compared to the average levels we saw last year. This shortage in supply with no reduction in demand is another large contributing factor to house prices rising so steeply in August this year.
How has working from home affected the housing market?
According to MYND, trends suggest that the longer the pandemic forces people to work remotely, the more businesses are expanding their remote work policies. Employees have reportedly been just as productive, and in some cases more so, when working remotely, and more employees have proposed they want to keep working outside of their normal office space after the pandemic ends. The Office of National Statistics says of working adults currently homeworking, 85% want to use a “hybrid” approach of both home and office working in the future.
Below is a table from the Office of National Statistics highlighting the increase of employees working from home from 2011 to the present day.
So, what does home working mean for the home improvement industry and the housing market? Property Wire has stated that the number of homeowners seeking information about house extensions is at an all-time high. Google data shows that the search term ‘house extension’ reached an all-time high in the summer of 2020 as homeowners looked for ways to get the most value out of their homes.
The combination of lockdowns and people working from home where they normally would not suggests that homeowners have sought out ways to extend their living space to create a permanent office or working space. With travel restrictions also in place, families who would normally spend money on a holiday have had to put travel plans on hold, meaning they have had money available to spend on home improvements they may have otherwise put off. Being in our homes so much more than usual during the pandemic has also presented opportunities to spot room for improvement in our homes as we have been more aware by being confined to our own space.
Besides the desire to increase and improve living space by adding a home office, home gym, or recreation room, there are other benefits to a house extension. Firstly, it is much cheaper than moving house and, therefore, a more achievable option for many homeowners. It is also almost always guaranteed to add value to your home. It is suggested that a well-built conservatory will add between 5 – 12 % value to your home.
Where is the housing market going in 2022?
Zoopla has released some interesting insights into the trends we can expect, both positive and negative, for the housing market as we move into 2022.
- In early 2022 we should start to see the economy stabilise, with a tentative rise in mortgage lending and house prices.
- The ability to work from home has expanded the horizons for many office workers who now feel able to look further afield. Research shows that 22% of people currently want to move, significantly higher than the usual 5% in a normal market.
- The high levels of equity homeowners have built up during the past 18 months, coupled with the shortage of homes on the market, is expected to support house price growth well into 2022.
- The rising cost of living, combined with an expectation that mortgage rates and taxes will rise next year, will impact affordability.
- House price growth is expected to end 2022 at 3%, with growth likely to be strongest in the East Midlands and Northwest, and weakest in London.