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Summary
- The house prices in the UK have risen by 5.4 per cent this year to reach a high of £245,000 average sale price per house in October.
- It is the fastest year-on-year growth in house prices in more than four years.
- Stamp duty holiday and land tax cuts initiated by the government have been the main reason behind the current performance of the housing market.
The house prices in the United Kingdom have hit a record high in 2020, according to the latest ONS data. The prices have risen by 5.4 per cent, reaching an average of £245,000 in October, which is highest since October 2016.
The stamp duty stimulus package that the government had rolled out earlier this year is the reason for this high price that is increasingly becoming discriminatory towards small-time buyers. In this regard, the government has now decided to review its mortgage rules and stem out this discrepancy in the market.
The high prices also make affordability a big issue for first-time homebuyers whom the government has been targeting as a big thrust group to promote growth in the housing industry.
High prices and affordability
Earlier this week, Bank of England had stated that it is looking at proposals of making mortgage terms more lucid for the first-time home buyers as they are being locked out of the property markets due to tough lending regulations and high property prices.
The first-time house buyers generally belong to the lower end of the housing market, and the government wants to promote the maximum growth in this bracket as it will provide the maximum volume of sales to the industry. A rapidly growing housing market in the UK is being seen as a key catalyst in bringing about economic recovery in the post-pandemic period.
Also Read: UK House Price: Rightmove (LON:RMV) predicts 4 per cent 'price rise' in 2021
The boom
Earlier this year, British Chancellor of the Exchequer Rishi Sunak had announced a stamp duty holiday on house purchase transactions for a period of eight months till March 2021 that started from August.
The scheme, which would help new house owners save up to £15,000 in their transactions, has induced significant buyer interest despite the deep recessionary state of the economy. Real estate agents and property websites reported a lot of buyer inquiries in their counters and web portals.
Over the next few months, a massive surge is expected in housing demand.
Impending situation
As the stamp duty holiday will come to an end on 31 March, it will be interesting to see if this boom continues in the post-vaccination and post stamp duty holiday period or whether the government extends the stamp duty holiday to continue with the boom.
