The Office for National Statistics (ONS) has reported that average house prices in the UK during October 2021 increased by 10.2% in the year to October 2021, down from 12.3% in the year to September 2021.
The average UK house price was £268,000 in October 2021, which is £24,000 higher than this time last year.
Average house prices increased over the year in England to £285,000 (9.8%), in Wales to £203,000 (15.5%), in Scotland to £181,000 (11.3%) and in Northern Ireland to £159,000 (10.7%).
London is the region with the lowest annual growth at 6.2%.
Kevin Roberts, director at Legal & General Mortgage Club, said: “Despite the end of the Stamp Duty holiday, the market seems to show little sign of cooling down. A strong labour market, as well as the prospect of locking into record low mortgage rates, have combined to keep housing activity particularly buoyant. As the Bank of England seeks to keep a lid on resurgent inflation, borrowers may well be tempted to get a foothold on the property ladder before any rate rise comes into effect.
“Whether the current level of house price growth will extend into the new year, is an uncertain matter. Although the labour market remains secure following the end of government support, inflationary pressures, exacerbated by the emergence of the new Omicron variant, may place household budgets under significant strain. Against this ever-changing backdrop, the value of advice remains paramount. Independent and experienced advisers are well-placed to help borrowers navigate a potential knock to their finances, and help customers lock into a deal that is well aligned with their unique needs.”
The average first-time buyer’s home across Britain has increased in price by approaching £9,000 a year for the past decade.
FTBs are now facing an average cost of £225,607, up from £138,973 just a decade ago according to MoveStreets.
That’s a 62 per cent increase meaning that the average first-time buyer has seen the cost of a home increase by £8,663 per year on average since 2011.
Across London, the average first-time buyer now pays £437,511 to get a foot on the ladder, a cost that has increased by £18,134 per year over the last 10 years. First-time buyers in the South East (£12,043) and the East of England (£11,206) have also seen the cost of their first home jump by more than £10,000 a year since 2011.
Even in the North East where property prices have increased at the slowest rate, the average first-time buyer house price has climbed by £3,301 per year over the last decade.
At local authority level, the largest annual increases in the cost of first-time buyer homes have been in Kensington and Chelsea (£38,459), Hackney (£30,845) and Hammersmith and Fulham (£29,648), while outside of the capital Hertsmere (£19,581), Cambridge (£18,309) and Elmbridge (£17,534) have seen some of the largest annual jumps.
Adam Kamani, chief executive of MoveStreets, says: “While we’ve come to expect that property prices are likely to climb due to the government’s failure in providing enough new affordable homes, it really does put it into perspective when looking at how much they’ve increased in the last decade.
“To think that in a single year, the average first-time buyer property will cost a further £8,663 when compared to the previous year is quite amazing and it’s a wonder so many struggle to buy in the current climate.
“Let’s not forget this is only first-time buyer properties we’re talking about here, which should essentially be the most affordable on the market in any given location.”
The average asking price of property coming to market has dropped by an average of 0.7% in December so far compared to last month, the largest monthly fall since January, according to Rightmove.
Strong buyer demand is carrying forward into 2022, with November showing buyer numbers 41% up on election-subdued 2019, and still 3% up on 2020, while fully available stock for sale has hit a new record low this month.
Tomer Aboody, director of property lender MT Finance, commented: “Even with the strongest property market we have seen in over 14 years and values hitting all-time highs, the December dip in asking prices isn’t surprising, and has been the norm over the years.
“Sellers are in an extremely strong position with multiple buyers for nearly every home, which is pushing up prices, but lack of stock is still a huge issue for buyers. Some are ultimately realising that patience is key, hoping the next year will bring more properties to the market.
“While estate agents are enjoying one of their best years in terms of the volume of sales, 2022 is expected to see a return to normality in the market. Prices will still rise, as buyers make the most of cheap mortgage rates but the pace of increase will be slower and lower, which will make for a calmer, less frenzied market.”
Jeremy Leaf, north London estate agent and former RICS residential chairman, added:“The big story for the housing market this year – and the past few months in particular – has been lack of supply.
“We are still registering many more buyers for each available property so don’t expect any significant price correction soon despite concerns about the rapid spread of the Omicron variant and imminent interest rate rises. On the contrary, we believe the new rules on mask wearing and home working will result in release of further pent-up demand as buyers continue to seek more flexible homes reflecting changing working patterns and lifestyles.
“We expect more balance between demand and supply too if our recent significant increase in requests for market appraisals and early January listings are anything to go by.”
The average UK house price hit a new record high of £272,992 in November, says the latest index from Halifax.
This means a monthly change of 1% – the fifth month in a row that house prices have increased – and an annual growth rate of 8.2%.
Halifax also notes that the quarterly change – up by 3.4% – is the highest seen since late 2006.
In Wales specifically, yearly growth totalled 14.8%, leading to the average house price in the country pushing past £200,000 for the first time ever.
And Scotland saw significant yearly growth, too. Here, the average house price went up by 8.5%, putting the average house price at £191,140 – also a newly minted record.
The report states that since March 2020, which it deems the start of the pandemic, house prices have increased by £1,691 a month on average, a total of £33,81 so far.
Halifax managing director Russell Galley believes that a stock shortage is driving the market, with a “strong labour market and keen competition among mortgage providers keeping rates close to historic low.”
He also points out that for first-time buyers, house prices have increased by 9.1% over the year compared to 8.8% for homemovers.
“We see this across different property types too,” he says, “with double-digit annual price inflation for flats (10.8%) over the last year compared to slower gains for detached properties (6.6%).
“This could suggest the ‘race for space’ is becoming less prominent than it was earlier in the pandemic, with industry data also showing the overall number of completed transactions has fallen back since the end of the stamp duty holiday.”
On the subject of flat prices outpacing that of houses, Hargreaves Lansdown personal finance analyst Sarah Coles says: “There are a few forces at play here. The ‘fear of missing out’ plays its part.
She explains: “Once prices start to rise quickly, anyone trying to get onto the property ladder starts to feel that unless they buy soon, prices will rise out of the reach of their deposit. It means they’re asking for help – both from government schemes like the Lifetime ISA and Help to Buy equity loan, and from their families.
“The Bank of Mum and Dad have seen the value of their own home rise, so they’re more comfortable about dipping into the equity in order to find a deposit for their offspring.
“And once they have the deposit in place, rock bottom mortgage deals are a major attraction, because first timers can fix at such low rates that it makes their monthly payments manageable.”
Coles continues: “But it’s not just first timers. Some of these smaller properties are likely to be second homes and buy-to-lets.”
This is a view shared by UK Finance, which just yesterday stated that an increasing amount of equity being withdrawn peaked in June 2021 – at the same time as when house purchasing activity was at its highest.
The peak amount being withdrawn – £106,000 – “together with the timing of this peak, suggest strongly that much of this has indeed been used to fund or part-fund additional property purchases,” UK Finance comments.
Quilter mortgage expert Karen Noye says: “At this stage, two months post stamp duty holiday withdrawal, it was hoped we might finally see a downtick in house prices.
“The still rising prices demonstrates that while the scheme did have an impact on house prices, it was not the only driver. The race for space appears to still be going strong, and when combined with the current demand outweighing supply, prices are still being pushed higher.
“Interest rates will be key over the coming months, and an increase would push mortgage rates up which will likely put potential buyers off. However, the new Omicron variant may have thrown a spanner in the works of any major changes planned by the Bank of England, meaning we are unlikely to see a rate rise just yet.
“While that may be the case, rock bottom mortgage rates are likely to creep up as an interest rate rise is still anticipated, it is just a question of when.
“Those waiting out the housing market boom in hopes of lower prices will likely have to wait a while longer yet.
“Regardless of whether house prices begin to drop, the likely increase in mortgage rates will contribute further towards the unaffordability of homeownership.”
Buyers opting for a 40-year mortgage term should consider the impact on their retirement plans, Interactive Investor has warned.
This week Kensington Mortgages launched a range of products that allow borrowers to fix their rate for between 11 and 40 years, but there is also a trend for buyers who take out shorter-term fixed rates to opt for a 35 or 40 year repayment plan in order to stretch their affordability further.
While this might be the right choice for many, buyers should bear in mind that borrowing over a longer term will increase their total interest bill and it could also delay their retirement plans.
According to calculations by Interactive Investor, a 30-year old currently earning £27,500 is on track for a pension pot worth approximately £190,000 if they pay 8% of their salary into a workplace scheme until they are 68.
The Pensions and Lifetime Savings Association estimates that £20,800 a year is enough for a moderate retirement income, including the state pension.
Interactive investor calculates that based on average yearly mortgage repayments of £7,644, someone who has a mortgage to 75 would need private pension savings to deliver an income of £19,105, on top of their state pension, to age 75, to cover their living costs and mortgage.
The pot worth £190,000 would run out at age 75 if it had to cover this full amount, leaving that person dependent on the state pension alone from that age.
Without mortgage costs to 75, the pot would last until 79, at the PLSA moderate level of income.
The Great British Retirement Survey found that 9% of retired people are still paying off a mortgage, while 1.5% are renting privately.
Of those with a mortgage, 40% are on capital repayment loans and 48% have interest-only mortgages.
Interactive Investor head of pensions and savings Becky O’Connor says: “The rise of mortgages with ultra-long terms that stretch way past retirement age is worrying.
“It requires a fundamental rethink of what people will need in retirement and could require a change to the assumptions that underpin current guidance for pension savers on how much they should aim to have in their pot.
“If you are considering paying a mortgage into retirement, there’s a huge reality check coming: you will need a much bigger pension than most people are currently on track for to finance this additional borrowing.
“Generally, mortgage brokers don’t interrogate people on their retirement plans, asking only at what age someone plans to retire as part of the application process.
“It’s very hard for both borrowers and brokers to know at what age they will end up retiring though, and whether they will have enough pension to cover repayments, if they have to give up work earlier than they initially thought when they were applying for the loan.
“It’s hard to project this far into the future when you are in your thirties and you may have an optimistic view of what you will be capable of, workwise, when you are 70.
“The difficulty is being able to guarantee the ability to continue working until 75, even if that is someone’s intention four decades earlier.
“When the auto-enrolment minimum was set it really was a minimum and assumes that it will provide enough in retirement for the average earner who also receives a full state pension and doesn’t have any housing costs when they retire.
“Unfortunately, the development of longer-term mortgages and the rise of private renting call these assumptions into serious question.
“If people have housing costs when they retire, they will either need a bigger pension or be able to work for longer – or face running out of money sooner.”
On a non-seasonally adjusted basis, transactions are 30.1% lower than October 2020 and 48.4% lower than September 2021.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “After a stonking September where buyers rushed to complete on their property purchases in order to take advantage of the last vestiges of the stamp duty holiday, October was bound to see a drop-off in transactions.
“The markets continue to price in an interest rate rise in December although the Bank of England is hinting that the situation is ‘finely balanced’ with slowing growth and the energy supply squeeze, which won’t be helped by a rate rise. In the meantime, the dynamic nature of mortgage pricing has paused a little as lenders take stock. Not all mortgages are becoming more expensive – generally, rates on lower loan-to-value mortgages have been rising but on higher LTVs they have been falling. A 95 per cent LTV two-year fix is cheaper now than it was two years ago, making life easier for first-time buyers, who are so important to the overall health of the housing market.”
Anna Clare Harper, chief executive of property consultancy SPI Capital, commented:“Housing transactions are important because they drive house prices, which both reflect and affect our confidence, and the economy.
“In the first month following the end of the temporary stamp duty reduction, UK housing transactions were down 28.2 per cent compared with October 2020 and 52 per cent lower than September 2021.
“In short, a 10-year peak in transactions last month was followed by a 10-year low.
“This is unsurprising, because stamp duty is a significant influence on affordability. Whilst buyers can borrow more from banks to pay more for housing, stamp duty has to be paid outright. For this reason, it can act as a catalyst for decisions to buy or not to buy.
“As for what next: we can expect a general slowdown in housing transactions, but a significant reduction in house prices is unlikely. This is because the cost of buying a new property is now higher, and the cost of holding on to a property remains low due to low interest rates and wide availability of low cost, fixed rate mortgages.
“Perhaps the biggest problem the housing market faces going forward is the shortage of available stock, which means that even as housing transactions fall, prices are likely to remain strong.”
Rob Barnard, director of intermediaries at Masthaven, added: “Despite the end of furlough and the stamp duty holiday, it’s encouraging to see that property transaction figures remain robust. Against a challenging financial backdrop, prospective buyers continue to push ahead with purchase plans. The release of pent-up demand has shifted the housing market up a gear and the very much enduring “race for space” continues to play its part, reflecting the extent to which our lifestyle changes have kept the market particularly buoyant.
“However, with an imminent rate rise now widely expected, the industry needs to work together to navigate this new environment head on. For many homeowners, this could present newfound financial challenges, leaving them in need of guidance from brokers more than ever before. Supporting brokers during this time and ensuring that they are well-equipped to meet the evolving expectations of customers will be essential. In the face of high inflation and rising house prices further stretching affordability, specialist lenders must collaborate closely with the broker community to take this new era of lending in our stride.”
Rents on larger properties are rising at a faster pace than smaller homes, according to the latest housing index from Hamptons.
Rents on four-bedroom properties are showing the strongest growth having increased by 10.6 per cent over the year to October. This gives an average rental cost of £1,949 per calendar month. This is three times the rate of growth seen for one-bedroom properties, where rents have increased just 3.7 per cent year-on-year, to £875 pcm, according to Hamptons’ monthly letting index.
The estate and letting agent said the shift towards working from home as a result of Covid had fuelled demand for more living space and larger properties. As a result the cost of trading up to gain this additional space had substantially increased.
The gap between the monthly rent of a one and two-bed home now stands at its widest point since 2013, when Hamptons starting compiling this index, with the monthly cost of renting a one bed property now equivalent to the cost of renting a two-bed property in 2016.
In total, the cost of trading up from a one-bed to a two-bed rental property has doubled over the last three years. Last month it cost £144 or 16 per cent more to rent a two-bed home, more than double the gap (£68 or 8 per cent) recorded in October 2018.
This equates to an extra £1,728 each year on average in rental payments. The cost of moving from a two-bed to a three-bed has also risen.
London is the costliest region in the country to trade up, both in absolute and percentage terms. Last month the average two-bed in the capital cost £567 or 42 per cent more each month than a one-bed. The North East is the cheapest region to swap a one-bed for a two-bed, where it will cost an extra £102 a month, equivalent to a 20 per cent increase.
Compared to last year, the cost of trading up has risen the most in the East Midlands. Here it cost 12 per cent or £63 more each month to trade a one-bed for a two-bed home than in October 2020. This is because rents on one-bed properties in the region have fallen by 0.2 per cent year-on-year, while two-bed rents have risen by 9.7 per cent.
London is the only region where it’s cheaper to trade up than it was last year. This is because rents on one-bed properties in the capital have risen faster than two-beds. Much of the demand for one-bed homes in London has been driven by younger tenants and pied-à-terre hunters returning to the capital, which in turn has bolstered rents.
Hamptons head of research Aneisha Beveridge says: “The pandemic has marked the first time that we’ve seen such a big divergence in rental growth by property size.
“Usually, rental growth remains fairly uniform no matter how large the home is, but over the last year the gap between rental growth on smaller and larger properties has widened to around 5 per cent. But as more tenants make their return to city centres, many seeking smaller properties, it’s likely that the gap will begin to shrink in the new year.
“There are few signs that rental growth is slowing as the year ends meaning that if growth continues at current rates, we are likely to see rents outside the capital hit £1,000 per month by the middle of next year.
“Rents in London are starting to recover their pre-pandemic momentum which will serve to bump up the headline rental growth figure nationally.”
Stamp duty jumped 67% to £10.2bn in the first half of the tax year, compared to 12 months ago, according to HMRC monthly data.
It said the rise was due to the slump in the property market caused by the pandemic in the first half of last year, followed by the surge sparked by the last July’s launch of the government’s stamp duty holiday.
Last month, stamp duty on property was up a record 76% from October last year, and 25% higher from the same month in 2019.
However, HMRC says: “Comparisons against receipts in the same period last year are not representative as they were heavily impacted by the effects of the Covid-19 pandemic.”
The overall tax take from the Treasury jumped 34% to £392bn in the first half of the current tax year between April and October, with higher receipts from a range of taxes, including the three largest revenue earners – VAT, income tax and national insurance.
The rise reflects more people leaving the government’s furlough scheme and returning to the workforce after the disruption of the pandemic.
Inheritance tax only made up £3.6bn of the tax take, but is a 20% rise on the same period a year earlier.
Hargreaves Lansdown personal finance analyst Sarah Coles says: “The enormous jump in stamp duty this tax year demonstrates the impact of the stamp duty holiday. And while the taxman may be rubbing his hands in glee, buyers are more likely to be wringing theirs.
“Tax is up a third in the first half of the tax year and stamp duty has soared by two thirds. And while the figures are distorted enormously by the impact of the pandemic, the dramatic impact of the stamp duty holiday is clear.
“It’s difficult to compare tax years, because the government brought in a set of rules to try to make it easier to manage tax bills, and another set to get us to spend more money and buy more property.
“However, we can see the enormous impact of the stamp duty holiday. It has pushed the average house price to a record high of £270,000 – up £28,000 in a year, and driven transactions higher. This year we had the busiest ever September in the property market, as buyers rushed for the final stamp duty holiday deadline.
“In terms of stimulating the market and generating tax, the move was clearly effective. However, if you’re trying to get onto the property ladder, or move up it, the impact is likely to be far less welcome.
“As the tax break dies away, buyers now have nothing to gain from the short-term measure, and in the process it has made the challenge of buying a home even harder.”
The number of people moving home more than doubled (132%) to 265,070 in the first half of 2021 compared to the same period last year, according to the latest Halifax data.
There were an additional 151,040 transactions in the first six months of this year, in contrast to the same period in 2020, where 114,030 home moves took place.
In the 12 months to June 2021, 461,010 home moves took place, up by more than 50% on the previous 12 months. The total number of moves in the last year is almost 100,000 more than at any point in the last 10 years.
This leap in property transactions comes after several years of flat or falling numbers and brought the annual total to the highest it’s been since 2007, when it hit 716,650.
First-time buyers also returned to the market in force during the first half of the year, with 210,900 transactions, an increase of 74% on the same six months last year. Those getting their first foot on the housing ladder accounted for nearly half (44%) of all sales in the period.
Across the UK there was a year-on-year doubling of the number of homemovers (132%). Every region in England and Wales saw transaction numbers double in the first half of 2021 compared to the same period last year, while Scotland saw an 86% increase.
The regions with the largest increases in home movers were the South East (169%) and London (165%). Northern Ireland has seen the greatest long-term increase, with a 182% rise over the last 10 years. In comparison, London has experienced a 64% rise over the same period.
A ‘race for space’, as workers adjust to a future where working from home more frequently, is reflected by changes in the mix of property type bought. Detached homes were the most popular for movers (30%), slightly ahead of semi-detached properties (28%). The largest rise in detached home purchases over the last ten years was in the West Midlands (+14%), while its neighbour, the East Midlands, experienced a fall of almost 9% in semi-detached sales.
The average price paid by homemovers rose 11% in the 12 months to September 2021, to £387,485.
Wales (£276,849), East Midlands (£320,715) and Yorkshire and the Humber (£284,268) all saw prices rise by 16% over the year, whereas Greater London (£699,864) saw prices rise by just 5%, the lowest of any region.
Homemovers put down an average deposit of £134,227, equivalent to 35% of the purchase price. Average deposits were worth at least 30% of the property in all UK regions. Highest deposit levels are in the South West (38%), with the North having the lowest at 30%.
Andrew Asaam, mortgages director at Halifax, said: “The rate and scale of the growth of the homemover market is quite remarkable. After several years of flat transaction numbers then a marked fall at the start of the pandemic, we’re now at a level not seen since 2007.
“There are many factors that have driven this activity, perhaps the biggest of which is the ‘race for space’ amongst those planning to work from home in the long term. The timing of some these moves will also have been influenced by people wanting to benefit from the stamp duty holiday.
“It is important to recognize the boom in sales was not limited to movers. There were more first-time buyers in the first six months of this this year, than in the first half of any of the last 10 years. Those getting on to the housing ladder accounted for almost half of all mortgage-backed purchases, which is in line with the long-term average.”
A majority of parents – 66% – asked by Trussle say they would consider buying a buy-to-let (BTL) near their offspring’s university to help with living costs.
The survey of 2,000 homeowners with children carried out by the broker also reveals that 53% of parents would considering downsizing to help with living costs.
Trussle collected data from Zoopla to show that Newcastle currently offers the highest amount of rental yield from a student property. With an average house price of £192,567 and average monthly rental income of £1,508, this equates to a yield of 9.40%.
And Southampton comes next, with the average house price at £235,911 and monthly income of £1,757 – an 8.94% yield.
“It’s true that BTLs aren’t the bargain that they once were,” says Trussle head of mortgages Miles Robinson.
Robinson mentions changes to tax and the stamp duty surcharge as reasons why BTL is no longer “the king of investments.”
He continues: “However, this new data shows that property is still seen as a safe and reliable way of generating extra income.
“This can be both in the short term, through rent collection and long term gains in house prices. In addition, the low interest climate means would-be landlords can lock-in a competitive BTL mortgage, which are typically interest-only.”