By - Team Kalkine Media
- The property market in the UK has seen a spurt in demand for houses, especially after the government started to ease the restrictions of nation-wide lockdown.
- According to the UK House Price Index of June 2020, England saw the strongest growth in the house prices of 3.5% over the year
- Following the move of stamp duty removal, the market values of the houses priced below GBP 500,000 soared a little over their respective asking prices, in a first since the subprime mortgage crisis of 2008.
- Jump in unemployment in the near future is likely to bring down the exacerbated price-rise of the houses.
Houses and other real-estate assets largely remain dynamic, as far as their prices are concerned. House prices and the market values of residential homes across the UK have seen a considerable upswing after the markets started recovering from the aftermath of the subprime mortgage crisis. Reportedly, the average price of a house in the UK touched a record mark of a little over GBP 245,000.
The coronavirus pandemic has unravelled a series of flaws in the functioning of several businesses, the prevailing risks in some of the large-scale enterprises and raised a severe doubt over the going concerns of many corporations. The record rise in the real estate market in the coronavirus-laden environment seems quite unusual as most of the other sectors are struggling to maintain their daily operations afloat.
The housing price surge in most of the urbanised localities has vastly outperformed the subdued growth in other sectors such as manufacturing, automobiles, aviation and hospitality etc. However, there are substantial reasons behind the rising price of houses in the UK that are more relevant due to the ongoing coronavirus pandemic.
The property market in the UK has seen a spurt in demand for houses, especially after the government started to ease the restrictions of nation-wide lockdown. Earlier this month, the government data showed that the average price of a house rose 3.4% on-year until June 2020.
According to the UK House Price Index of June 2020, England saw the growth in the house prices of 3.5% over the year with the East Midlands region of England registered the highest spike of 4.5% and the North East region recording the lowest growth of 1.7% in the corresponding period.
Other geographies of the UK that witnessed a largely similar growth rate in house prices include Northern Ireland, Scotland and Wales logging an annual growth of 3%, 2.9% and 2.8% respectively.
There are clear concerns over such a spike in the prices of houses as the bargaining capacity of middle-income homebuyerâs has been reduced with a large section of first-time homebuyers and other prospective buyers having relatively lower budgets are now reconsidering their buying decisions and deferring their respective buying calls.
The expectations of normal business activity in the near future are seemingly getting diminished with the time as the authorities are unable to contain the spread and the growing number of coronavirus patients. Without a definitive date for the availability of a clinically approved vaccine, a majority of people seemed to have already anticipated a longer work-from-home model.
Inferentially, there are several reasons behind the housing price surge in the UKâs property market. We look at some of the possible reasons behind the rising house prices in the UK:
The prospective buyers are now experiencing a dilemma over making their final buy call, as some are anticipating a steep fall in the housing prices, going ahead, while some are thinking to encash the opportunity to buy a house without paying the stamp duty. Analysts and policymakers have been going through an apparently endless conundrum due to the pandemic-driven market conditions following which it is quite hard to arrive at an absolute projection.
As we have already seen through the scope of multiple research and assumptions, the very first prediction of V-shaped recovery turned into a U-shaped after the second wave of coronavirus cases erupted in the nation. Later, some experts started foreseeing a Nike-swoosh-shaped come back and, now are looking forward to a back-to-front square root-shaped revival. Forward-looking views over the housing prices remain divided with some backing for stability, while others are anticipating a major correction in the record high prices. An unusual jump in unemployment in the near future is likely to bring down the exacerbated price-rise of the houses.
The government-aided Furlough Scheme is set to end on October 31, 2020, which may certainly steer an increase in unemployment as the recently introduced Job Support Scheme is drafted to benefit the âviable jobsâ only. A rise in unemployment will certainly reduce the demand for new houses as the number of people with higher disposable income, or a portion of funds set aside for purchasing a house will shrink as the priority will change to meeting the periodic requirements.
The Job Support Scheme does ensure a proportionate and regular monthly income until March 2021, but the benefits are relatively less as compared to the ongoing Furlough Scheme. People who are looking forward to buying a house can choose to stay put for a while and wait till the prices stabilise as the decision to buy an outwardly overpriced house.