What will house prices do this year? Should we expecting the much-predicted house price crash in the next few months, or will the UK property market weather the post Covid-19 storm?
Amid tightening mortgage lending practices and forecasts of an economic downturn, it is more important than ever to keep abreast of what house prices are doing if you are a potential buyers – and if you're a seller, too. 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).
Are house prices falling in 2020?
Technically, yes – the most recent Nationwide house price index is showing an annual house price fall of 0.1 per cent – for the first time since 2012. A house price fall is not yet recorded in quarterly figures, however, with the lates quarterly data still showing house prices rising, especially in London, where the quarterly figure stands at a 2.1 per cent growth. Several other regions, including in the north of England and in Wales were all showing a healthy house price growth until very recently.
So, why it is true that the current house price trajectory is downward, property prices have fallen only slightly, and sales data are showing that, on average, buyers are paying full asking prices or only very slightly lower, with the average 'discount' on asking price of between one and three per cent.
What is the average UK house price in 2020?
The most up-to-date average UK house price is £216,403 in June 2020; by comparison, it was £231,855 in March 2020.
House prices after Covid-19: what to expect
Most property experts now agree that a further slowing down of the property market by the end of 2020 is highly likely, although no one can say confidently how much further house prices will fall.
Our general advice is to pay attention to your local market – browse the most recent sold prices in your chosen area and be aware of regional trends. Obivously, areas that see higher levels of unemployment or secondary, localised Covid-19 lockdowns will see lower house prices. However, you also need to bear in mind that areas with high demand and reduced supply of housing are unlikely to see any significant reductions in house prices. This is particularly true of cities with dwindling housing stock such as London and Edinburgh, and most high-demand areas in south east England.
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.
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.