House prices: all you need to know in 2020

In this comprehensive guide to house prices, we discuss how to negotiate, as well as what to expect from property prices in 2020 – and beyond

house prices
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What can you expect from house prices for the rest of the year? With so much conflicting information online, it's important to keep abreast of the facts and predictions from reliable sources. We regularly monitor house price predictions and statistics from reputable property experts, so the information in this guide is based on the most reliable expert opinion rather than mere speculation.

Amid tightening mortgage lending practices and forecasts of an economic downturn, it is more important than ever to keep abreast of what house prices, whether you are planning to buy or sell a home. This up-to-date guide to house prices 2020 will give you a good general sense of where the property market is heading – although we'll be the first to admit that it also pays to be aware of you local property market trends (we explain why below). 

  • It's more important than ever to find the best mortgage rates if you're buying a house – do this with the help of our guide

Why are house prices rising?

The short answer is: house prices are rising because pent-up demand for property has been released following the lifting of the UK-wide lockdown during May 2020. Since then, house prices have been increasing steadily across the UK (apart from in London). Annual house price growth stood at 5.2 per cent at the end of August – the highest level since late 2016. 

This is happening for two reasons. One is that there are fewer houses being put up for sale than there are buyers.Statistical data from the RICS UK Residential Market Survey is showing a massive surge in buyer enquiries by 75 per cent. However, the number of new property instructions rose by 59 per cent, and the number of agreed sales, by 57 per cent. 

These figures mean that the vast majority of newly listed homes of sale are being snapped up, putting sellers in strong position to negotiate higher house prices. Previous house price reports over the last couple of months have shown that this is now the case in UK regions, particularly in south west and northern England, as well as in Wales.  

The second reason is that the government's stamp duty holiday plan is paying off, at least in the short term: the cancellation of all stamp duty payments on properties up to £500,000 has inevitably resulted in a spike of buyer interest – and in sellers being able to raise asking prices, bringing up the average property price in the UK to £320,265.  

Will this mini-boom continue? Property experts from Nationwide and Halifax, as well as financial think tanks such as the Office of Budget Responsibility are confident that house prices will fall significantly starting from the end of 2020, the the OBR predicting a fall of around six per cent  – or as much as 16 per cent if the economy takes a serious turn for the worse. 

The end of the furlough scheme and the deepening recession will almost certainly hit the housing market – the question is when. 

Will house prices fall at the end of 2020?

The  Centre for Economics and Business Research (CEBR) is predicting a sharp fall in house prices next year – by a steep 14 per cent. The think tank is timing the house price fall with the end of the stamp duty holiday, but many property experts believe that house prices will begin falling well before then, just not quite as dramatically as the double-digit decrease the CEBR are forecasting. 

Halifax, Rightmove, Zoopla are all united in predicting a property market downturn by the end of the year, so you can expect house prices to start coming down by December (which is a slow time for the property market anyway). As ever, how your local property market reacts will be slightly different to the national average – which is just that, an average. Areas with strong demand are unlikely to see large decreases, but we may start to see prices dropping in large urban areas like London, partly because they're slightly less popular since the beginning of the pandemic. Areas with rising unemployment will also see larger house price falls. 

What is the average UK house price in 2020?

The most up-to-date average UK house price is £224,123 in August 2020.

House prices 2020 and negative equity: should I be worried? 

Negative equity is when the value of the property becomes less than the loan you've taken out for your mortgage, and falling house prices will inevitably put some people in low or negative equity. However, it's only really a problem if you were planning on selling. If you do find yourself in negative equity, the best thing to do is to sit tight and to avoid selling at all costs. 

If you need to sell, for example due to moving for a job or because of a divorce or other life circumstances that mean you can't wait, then there are a few things you can do. 

1. Firstly, try overpaying your mortgage – if your current mortgage terms will allow you to. 

2. Consider renting out your property without selling and either renting or staying with family. Your lender will need to agree to this change.

3. Get in touch with your lender. A few offer negative equity mortgages. With one of these the negative equity would be transferred to a new property. On the downside, you might face early repayment charges on the existing mortgage, and there may be extra fees plus the new mortgage may be at a higher interest rate than your current one 

House price discounts for key workers: how will they work?

You may have heard about the government pledge to secure a 30 per cent discount on selected housing for first-time buyers, with priority given to key workers such as nurses, teachers, and firefighters. The First Homes scheme will only apply to homes in new developments – about 1,500 initially – and to 25 per cent of newly build affordable housing in the future. The discount will then be passed to subsequent buyers, to prevent attempt at profiteering from the scheme. 

Price caps will also apply to this scheme, with £250,000 the upper limit outside the capital, and £420,000 inside London. Applicants will need to have a household income of no more than £80,000, or £90,000 in London. The sales of First Homes will be restricted to local buyers for the first three months after the property being put up for sale. 

How to get the best house price if you're buying

There has been much discussion about buyers' expectations of reduced house prices after coronavirus. We'll be honest and say: this isn't currently the reality in the vast majority of cases, and asking a seller to reduce the price purely out of expectations of a post Covid-19 discount won't do you any favours. As property expert Phil Spencer puts it in an interview with Hello! magazine,

'That is taking advantage of the circumstances. In actual fact, the prices have not fallen yet, so in trying to renegotiate the price you agreed before lockdown, you are asking them to anticipate a fall that hasn't happened yet. That’s quite a lot to take on board as a seller… I think it's pretty rude to instigate that conversation yourself.'

All the available data shows that, in the vast majority of cases, the pandemic has not led to a reduction in asking prices. If you want a home in a prime area and in perfect condition, and with a garden, you are highly unlikely to get much give from the seller.

If you are hoping for a reduced price, you will have to compromise on something, whether it's location, the condition of the property, or its size. If you get the sense that the current owners are keen to sell, do negotiate, but be reasonable: trying to knock off much more than 10 per cent is likely to make you sound like you're not serious about the purchase. 

You also need to budget carefully. Be aware of what costs you'll need to cover on top of the house price, and start all negotiations with that knowledge. There will be a number of initial fees such as the valuation fee and the surveyors fee, as well as the additional parties to pay such as the lender/broker fees (if first time buyer, no estate agents fees) and the conveyancer.

There are is then the fees associated with the mortgage including the booking fee, arrangement fee and mortgage valuation fee. We recommend saving an additional £2,500 on top of your deposit to cover the costs.  Please be aware that if more than one person is purchasing and they have already owned a property then stamp duty will be payable even though the other person has never owned a property anywhere in the world before.

Find out more about negotiating house prices in our guide.

Sellers: how to boost your house price

There is by now plenty of evidence that Covid-10 has shifted buyers' priorities when it comes to buying homes, and if you're selling at this point, you'll need to bear those new priorities in mind. 

Kerb appeal is becoming more important, with people considering carefully where they'll be spending the majority of their time. So, a freshly painted exterior and tidy front garden will help you secure a better house price.

Next, consider shifting work circumstances: people will want to know about potential  home office space much more than they used to, and they'll likely be interested in opportunities for extending the property rather than, say, proximity to trains. 

Fid lots of ways to add value to your home in our guide.

House prices and mortgages: what first-time buyers need to know 

The hard truth is that homes have just become more expensive to first-time buyers not because of anything to do with house prices on their own, but because of the situation with first-time buyer mortgages

As a general rule, you will now need a 15 per cent deposit to secure a residential mortgage. Technically, five- and 10-per-cent mortgages haven't disappeared completely, but their availability is by now so limited that it's very difficult to get one. 

If you don't have the resources for putting together a larger deposit, look into Help to Buy, Shared Ownership, or a guarantor mortgage

You should also speak to a mortgage broker who might just be able to find a specialist lender for your needs, or will at least give you honest advice on what you should do with the deposit you have. 

We've teamed with online mortgage specialist Habito: use their mortgage comparison tool below to see how much you could borrow. 

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