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Summary
- The annual house price climbed to a six-year high of 7.3 per cent in December
- Islington in north London has shown the fastest house price growth this year
- Stamp duty holidays, cheap credit and changing preferences of the people stimulated the housing demand
The year 2020 has been a tough one for the economy for most sectors across all the countries. But some sectors did well as compared to others. If we talk about the UK in particular, despite all odds, the housing sector fared well in comparison with other sectors.
According to Nationwide's house price index, the annual house price climbed to a six-year high of 7.3 per cent in December as it continued to accelerate from 6.5 per cent in November. In December, the housing prices grew by 0.8 per cent month on month to £230,920.
At present, the housing prices are 5.3 per cent above the level seen during the peak of the unprecedented crisis in March. The property transactions and prices continue to grow as the sector defies all expectations.
(Image source: ©Kalkine Group 2020)
Also read: Housing boost: BoE mulls new mortgage impetus for homebuyers
According to the estate agent Halifax, with the average property rising 13.4 per cent to £727,922, Islington in north London has shown the fastest house price growth this year. Leeds stood second as it recorded a 11.3 per cent rise in property prices.
The recovery in the housing market seemed unlikely, given the prevailing uncertainties in the trading environment. The housing market, along with other major sectors, had come to a screeching halt during the first lockdown, and the British economy slipped into recession.
During the peak of the unprecedented crisis, the chancellor of the Exchequer, Rishi Sunak came to the rescue of the battered sector as he announced stamp duty holidays for home buyers in his summer statement. This provided the much-needed boost to the sector.
In addition, practising social distancing and remote working environment pushed people to buy bigger homes with the location not being a constraint anymore.
As stamp duty holidays and changing preferences of the people stimulated the housing demand, the furlough and self-employment income support schemes were important stimulants to keep the cost of borrowing in check while ensuring the unrestricted flow of credit. Any loss of income for homebuyers could have resulted in higher borrowing costs and disruption in the flow of credit in the economy. Also, the present interest rates in the economy, which are at an all-time low, acted as a catalyst for a boom in the housing market.
The overall outlook of the sector still remains pretty uncertain as the country is facing a new wave of coronavirus cases. The threat of pandemic still looms over the British economy. Moreover, experts believe that the demand for housing shall fizzle out as soon as the stamp duty holiday ends in March. Moreover, the end of Covid job furlough scheme can also slow down the market.
