Calls for more time as house boom peaks
THE UK house price boom may have peaked as prices fall, new instructions dry up and more homes sit unsold on estate agents’ books.
Activity is now slowing sharply with Chancellor Rishi Sunak’s stamp duty holiday drawing to a close at the end of March.
Prices soared after the first lockdown, due to a combination of pent-up demand, and the urge to exchange cramped city flats for larger homes with gardens.
The market was given a further boost by the stamp duty holiday, which saves buyers a maximum of £15,000 on a £500,000 property, provided they complete by March 31.
This has helped drive property prices to record highs, even as the economy crashes, businesses close and people lose their jobs during the pandemic.
Affordability is now at its worst level in 10 years, with the average home costing almost 10 times the average income.
The average salary stands at £25,123, while the average house price is 9.94 times higher at £249,633, according to the figures from independent letting and sales agent Benham and Reeves.
London remains the least affordable with a score of 15.74, followed by the South East and SouthWest.The North East is the most affordable region at 6.34, followed by Northern Ireland and Scotland.
Benham and Reeves director Marc von Grundherr said buyers need a minimum of one year’s salary for the average deposit: “Growth has been driven by a steep jump in prices brought about by the adrenaline shot of a stamp duty holiday.”
He said the affordability problem has grown as earnings fail to keep pace with house prices.
Prices fell by 0.3 per cent in January, according to the Halifax House Price Index, but remain 5.4 per cent higher than 12 months ago.
Sarah Coles, Hargreaves Lansdown’s personal finance analyst, said the housing market is suffering from “a winter chill”: “Buyers are getting cold feet due to the lockdown, growing concerns for the future, and the stamp duty holiday deadline.”
Bank of England data shows new mortgage approvals also slowed in December, which suggests fewer intend to buy in the first three months of this year, Coles said.
Many homeowners are now starting to worry if they can afford their existing mortgage, as Bank of England data suggests high street banks are bracing themselves for more people to start defaulting over the next couple of months, she added.
Miles Robinson, head of mortgages at online broker Trussle, said buyers may pull out if they cannot complete before March 31, driving prices down: “After months of unprecedented demand and growth, the market may now begin to weaken.”
Many in the property industry are calling for the Chancellor to replace the stamp duty holiday cliff edge with a phased withdrawal, to give current buyers more time to complete. Others would like to see stamp duty scrapped altogether.