House prices rise at four times the rate of flats

House prices rise at four times the rate of flats

House prices rise at four times the rate of flats

Zoopla

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Hot property alert! The pandemic-led ‘search for space’ and shift to working from home has fuelled buyer demand for houses.

Strong demand from prospective buyers for family homes is causing the price of houses to climb at more than four times the rate of flats.

The average cost of a house rose by 5.2% over the last year, while the value of flats inched ahead by just 1.1% over the same timescale, according to our latest House Price Index.

Buyer appetite for houses, which typically have higher prices than flats, is helping to fuel what is set to be a record-breaking year in the housing market.

More than 1.5 million homes are expected to change hands this year, a staggering 45% more than in 2020. And the total value of homes sold is expected to reach £461bn, up 68% compared with 2019.

Graph showing UK residential transactions from 2000 to 2021
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Why is this happening?

The ‘search for space’ has been a key feature of the housing market during the pandemic, with successive lockdowns prompting many people to carry out a once-in-a-lifetime reassessment of their homes and lifestyles.

Spending more time at home has led to a desire for more space, both inside and out, particularly for families trying to homeschool and work from home.

And many older homeowners are also reevaluating their housing and lifestyle needs and moving for the first time in many years.

Meanwhile, the stamp duty holiday has provided an added impetus for many people to move more generally. The tax break means buyers pay no tax on the first £500,000 of a property purchase until the end of June, before the threshold drops to £250,000 for a further three months.

This weight of demand has led to houses selling within an average of just 42 days – three weeks quicker than flats.

What’s the background?

Successive lockdowns and the shift in working patterns is having a two-fold impact on the housing market.

On the one hand, it has changed the features people prioritise in their home, as they become more focused on having a larger property with dedicated space in which they can work and get good broadband connections.

At the same time, if workers are freed up from having to travel into the office every day, living close to where they work or in a location with good transport connections becomes less of a priority.

With many companies announcing plans to continue to offer flexible working to employees for at least part of the week, houses are likely to continue to be hot property.

What’s the outlook?

The ‘search for space’ trend still has further to run, according to Grainne Gilmore, Zoopla's head of research at Zoopla. And it’s a sentiment shared by a member of the Bank of England’s Monetary Policy Committee in a speech recently. 

"The easing of lockdowns will continue to cause a natural fall in demand as people are able to see family and enjoy amenities that have been shut for more than a year.

"But new buyer demand will still emerge throughout the second half of the year as office-based workplaces confirm if they will be pursuing more flexible working practices," Gilmore explained.

"Households who have the opportunity to commute less frequently have more options when it comes to choosing where to live, and this could prompt a move.

"Likewise, older households will continue to review how and where they are living, with many more set to move for the first time in years. 

"With an increased array of mortgages to choose from, first-time buyers will also remain active in the market."

What could this mean for you?

Sellers

Graph showing constraints on the volume of homes for sale continue

The mismatch between the levels of buyer demand and homes for sale means that if you have a house to sell, particularly a family home, you are likely to be in a great position to agree a sale quickly.

Things could be trickier if you try to coordinate the sale of your current home with the purchase of a new one, due to the shortage of properties currently on the market.

However, more homes are expected to be put up for sale as further lockdown restrictions ease and the vaccine roll-out continues.

Buyers

With demand from potential buyers outstripping the level of homes for sale, if you’re looking to step onto, or up the housing ladder, you’re likely to face competition.

And it’s likely to be tougher if you’re looking to buy a house, particularly a three-bedroom family home, the most coveted property type.

So get organised to give yourself the best chance of securing the home you want.

Pull together any paperwork you will need for the purchase and try to secure a mortgage offer in principle to put you in a good position to move quickly when you do spot something you like.

If you complete on a property – in other words, legally transfer ownership – before 1 October, you could benefit from the stamp duty holiday too. 

How Zoopla can help

  • Thinking of selling? Use My Home to find out how much your existing property is likely to be worth, giving you an idea of how much you can afford to spend on your next property.
  • Searching for a home to buy? Get ahead by registering with Zoopla and signing up for our property alerts, enabling you to find out as soon as a home meeting your criteria comes on to the market.
  • Whether you're buying or selling, speak with local estate agents to get expert market advice.

Top three takeaways

  • Strong demand for family homes is causing the price of houses to climb at more than four times the rate of flats
  • The average cost of a house rose by 5.2% in the last year, while the value of flats inched ahead by just 1.1% 
  • Buyer appetite for houses has contributed to the estimated total value of homes that will change hands this year soaring by 68% compared with 2019