Are house prices going up? How can house prices go up if the economy is going down? It's a little confusing, but we'll talk you through it.
The economy is going down, but house prices are going up. Have questions? You’re not alone. We’ll look at why house prices are going up and what it means for you.
It’s no secret that the property market is usually at the whim of the economy more generally. When the economy booms, house prices tend to boom. When the economy suffers, house prices tend to suffer. But at the moment, things are a little more complicated. We’ve just found out that the UK seems to be entering a major recession — but we keep hearing about a housing boom. So why are house prices going up?
There have been a couple of big changes that have kept the property market fluctuating. Firstly, COVID-19 essentially sent the property market into a deep freeze — prices weren’t going up or down, moving just stopped completely. But when moving was allowed again, things started to pick up. That, combined with the stamp duty holiday, has led to what some are describing as a mini-boom. In fact, July 2020 saw the busiest month for the housing market in 10 years.
The 'boom' is more about increased demand and properties going back on the market due to the stamp duty holiday and more people being interested in moving."
That being said, it’s important not to focus too much on the price aspect. All of this talk of a “boom” in newspaper headlines makes it sound like prices are skyrocketing — but the reality is far more modest. Initially, Rightmove saw an average increase of about 2.4%, compared to pre-lockdown prices and there was another jump in July. The “boom” is more about increased demand and properties going back on the market due to the stamp duty holiday and more people being interested in moving. That may lead to competitive markets in some areas, as we will see, but it’s not the same as prices leaping all over the country.
Although we often hear “the housing market” talked about as one big entity, the truth is there are often some big differences. The current climate means that house prices are down in London, which makes sense — more people switched to remote working and became desperate for green space.
Research showed that people in London were looking at Buckinghamshire, people in Leicester were looking at Markfield, and people in Sheffield were looking in Whiston. We’ll have to see if all of that property browsing has a real effect on the market.
What happens now? Zoopla and others have predicted that prices will start falling toward the end of the year and well into next year, which may be good or bad news for you — it could be good news if you’re looking to get on the housing ladder for the first time. Others have said prices will take a dip, but then recover next year.
The truth is probably muddier. The current economic climate combined with current events make it difficult to predict what will happen in the coming months or years, so it may be best to focus on your personal circumstances rather than waiting for a big boom or bust.
So pay attention to what’s going on in the world, but know that nobody has a crystal ball that can predict the future — knowing whether it’s a good time to buy or sell is ultimately a personal decision.