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Commentary: Rise in UK house prices

21 October 2020

House prices have risen again in the latest ONS house price index for August, showing that house price growth is picking up steam as 2020 progresses, despite the effects of the pandemic. 

Lee Pickett, a Real Estate Partner at global legal business, DWF, comments as the August ONS figures are released today (October 21st 2020). Lee said: 

"UK average house prices increased by 2.5% over the year to August 2020, up from 2.1% in July 2020. 

"Today's figures show that prices are rising steadily into the second half of the year, in spite of the effects of the pandemic – which could be down to an increase in demand as buyers return to the market after the economy stalled in March or due to a shortage of suitable housing stock coming on to the market. 

"What's interesting is that the data doesn’t yet reflect the effect of the stamp duty holiday for house sales in England and Northern Ireland, implemented in July, as it can take around 6-8 weeks at least to complete a house sale. So we will have to wait for next month's data to get a clearer picture on that, but with prices continuing their upward trend even before the stamp duty intervention, we can expect to see even greater increases next month as home movers return to the market.  

"This is potentially good news if you're a home owner as the value of housing stock is rising and mortgage interest rates are at all-time lows, but not so great for those hoping to get a first foot on the ladder. Average UK house prices peaked at £239,000 in August 2020 – around eight times greater than the average UK salary of circa £30,000, putting home ownership further out of reach for many. 

"The stamp duty break on homes under £500,000 will potentially save buyers up to £15,000 in tax, but it only has a short shelf life and when it ends in March 2021, we are likely to see a dramatic slump in sales and potentially a substantial drop in house prices."
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