Here in Scotland, we have seen house prices surge to record highs – with the latest figures from the Office for National Statistics showing that the average house price rose by nearly 11% in the year to March 2021.
According to the ONS, house prices in Scotland increased by 10.6% over the year to March 2021, compared with a rise of 10.2 % in England, 11% in Wales and 6% in Northern Ireland. What’s more, the latest figures from the Nationwide House Price Index show that house price growth reached its highest level for seven years in May at 10.6% and month-on-month prices grew by 1.8%, down slightly from 2.3% in April.
This time last year, property market activity collapsed in the wake of the first lockdown with housing transactions tumbling to a record low of 42,000 in April 2020. However, activity surged in the last quarter of last year and into 2021, hitting a record high of 183,000 in March. Although the stamp duty holiday gave the market momentum, this continued as interest rates remained low and the government announced the Mortgage Guarantee Scheme.
Why is this happening?
Pent up demand caused by the lockdown, a re-evaluation of housing needs, the stamp duty holiday, low interest rates and the reintroduction of high LTV mortgages have resulted in the number of transactions from January to March being nearly half on the start of last year.
The figures from the Office for National Statistics (ONS) reveal that the average price of detached properties in the UK is rising faster than flats as buyers seek more internal space to accommodate an increase in home working, along with high demand for outside space following a year of lockdowns and only being able to socialise with friends and family in our gardens.
Buyers who have continued to earn have also been saving money given that they have been unable to take overseas holidays, make large life changing purchases, or spend money socialising.
Many homes across Scotland are getting snapped up within days – sometimes hours – of hitting the market, as competition is rife. The supply can’t meet the current demand, and this is pushing up prices. This fast-moving property market can cause issues for buyers – especially first time buyers – as they are being priced out of the market. In addition, those who have sold quickly are struggling to buy.
According to research from Nationwide, of those moving or considering a move, 33% were looking to move to a different area, while nearly 30% were doing so for more outside space. The majority of movers were looking to make the move to more rural areas especially among the older generation. What’s more, 36% said they were more likely to consider enhancing their home as a result of Covid-19, with nearly half 46% of these looking to add or maximise space.
First time buyers
Demand for property from first time buyers is extremely high and the inevitable upward pressure on prices is making it particularly hard for first-time buyers to get onto the property ladder. Prices are accelerating faster than they can save for a deposit and they are struggling to meet the affordability criteria.
The stamp duty holiday and re-introduction of 95% loan-to-value mortgages have played a huge part in the increase in buyer numbers – with the repeated introduction of restrictions resulting in buyers looking for more space to accommodate the continuing home working requirement. First time buyers who have had difficulty with their credit rating are also struggling as lenders continue to be cautious however, there are options available for credit impaired buyers. However, many people are in the position where they are stuck paying rents that are substantially higher than mortgage payments.
If you are looking to remortgage, move up the ladder or buy your first home, talk to us at The Mortgage Hub to find out how we can help you to secure the best mortgage for your circumstances.