Why are we obsessed with house prices in the UK?
Well 65% of all UK homes are owned by the occupier and lots of people own more than one home. For many of us our home is our biggest debt and or asset. We spend an age to save up for one and then move around on the ladder and then it is usually our primary asset in our wills. If you invested £20k in a house in 1975 it would have been on average worth £248k, 37 years later in 2012.
So, what happened in the year of the Covid?
Basically, lots of people used the temporary lifting of the lockdown to move home. The Nationwide House Price index reported that there was a 7.3% increase in house prices in 2020. The average property price rose to £230,920 up over £15k. This was a heady combination of pent up demand, a friendly Chancellor Stamp Duty cut and a run from Urban to Rural. Over 74k Londoners escaped into the local countryside.
OK – But what now?
Christmas saw another surge in house purchase interest. Zoopla reported that on Boxing Day their website saw a 70% increase in traffic. So, if this is the start of the journey to moving there will be a surge to beat the March 31st Stamp Duty cut off deadline. In my experience they will need to go like the clappers, have a tailwind and be lucky to achieve that in time!
So, 2021 will be another growth year?
More complex than that. Whilst running to beat the tax man is a big incentive to buy there are some nasty looking clouds on the near horizon too. In April over 9 million furloughed employees will find out if their jobs still exist. If not the impact on home ownership might be brutal and swift as many have already used their mortgage repayment holidays. The supply demand seesaw might tip in the direction of supply for a change. This could halt price growth or even drive it down. There are also the uncharted waters of the Brexit unwind, will the pound be stronger or weaker? Will our products and services look attractive to international buyers or look out of their reach? Whilst the 2020 summer economic rebound was good for some will the vaccination roll out trigger a similar economic burst of energy? Interest rates held so low for so long now that they hardly ever get a mention means that it is cheaper to borrow money than ever – but I seem to recall that a flow of unsecured and dodgy lending got us all into a pickle in 2008.
So there are uncertainties, but there always are. In 1975 the Vietnam war was ending but Pol Pot has snuck into power in Cambodia. There was the Oil Crisis that triggered the double (Thriller in Manilla- esq) blow of high unemployment and high inflation (20%) (later coined stagflation) triggering the UK government to ask for a bail out from the IMF. But if you ignored all of that and put £20k into a house it would be worth £248k a mere 37 years later!!