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Your May market update: Price growth, stamp duty demand and falling rents

House prices are still going up, but dips in rental prices may be leading people back into cities. Plus, the last flames of the stamp duty holiday may be proving tricky for some potential buyers.

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With so much happening in the housing market — and so many headlines to decipher — we introduced a monthly update last month, to help you get up to speed with all of the latest news. It’s easy to get overwhelmed by all of the facts, figures, and percentages that appear in the headlines, but we think it’s important to look beyond that and see what changes in the housing market really mean for you.

While in April we looked at the 5% deposit scheme and the newly revamped Help to Buy, this month we’ve seen house pricing (still) increasing and we’ll look at how changes in rental demand can affect migration and house prices. Oh, and the Queen might even make an appearance. Welcome to your May Monthly Update.

Record price increases — again

There have been so many different announcements about record price growth, you may be wondering what “record” even means. If you saw recent headlines saying we’ve seen the biggest price increases in five years, this came from Halifax who analyzed data from their mortgage lending. They found that there had been a 1.4% jump in the cost of a home in April, which made the average selling price to a record high of just over £258,000.

Of course, the month before the Nationwide building society said house prices rose by 2.1%  – which came in at the highest monthly increase since 2004.

So what does it mean? Demand is undeniably high — and prices have undeniably gotten higher in recent years.

But it’s good to remember that these headlines come from multiple different data sources — some will come from the government, some will come from big property portals, some will come from estate agents and lenders themselves. That's why you may see so many stories that all seem to say the same thing.

It’s also important to remember that growing house prices aren’t always great news for everyone. Some buyers have been saying the demand being fuelled by the end of the stamp duty holiday is putting homes out of reach — and some even feel like sellers are just adding any potentially stamp duty savings onto the price. Whether you're a first-time buyer or looking to sell and upgrade to somewhere larger, prices going up can be a double-edged sword.

If more affordable rents can lure renters back into cities, it may show that the trend for the countryside starting to swing the other way."

Rent price drops leading to an increase in demand

One of the biggest stories of the pandemic was people moving out of cities in search of a little green — and along with that exodus, rental prices started to drop. In Edinburgh, they dropped by 3.2%, in Manchester they were down by 1% — and in some areas in London, rental prices were down by nearly 10%. There just wasn’t enough demand. 

But now that same price decrease now seems to be pointing to increased demand. Zoopla has found that since Easter this year, demand has started to pick up again. “The opening up of the economy and the slow return to business as usual as the vaccine rolls out means [rental] demand will continue to build over the summer... " Gráinne Gilmore, head of research at Zoopla, explained. "Demand will continue to rise in city centres as offices start to reopen."

What does this mean for the housing market? If more affordable rents can lure renters back into cities, it may show that the preference for the countryside starts to swing the other way. People who may have thought city rents were out of reach may suddenly find they have an opportunity. But that could drive rents back up in cities — and house prices along with them. Only time will tell, but it’s definitely worth keeping an eye on as lockdowns continue to lift. 

The last month has definitely been a busy one for the housing market — even the Queen’s speech pointed to the end of ground rents and a potential overhaul of the planning system (though it's been met with a mixed response). We’ll keep you posted on these stories, and all of the headlines sure to come, next month.