1. Economics
May 20, 2020

UK house prices were booming – until the pandemic kicked in

By Jonn Elledge

Here’s one for fans of getting angry about meaningless statistics: until just before this whole pandemic thing kicked in, UK house prices were looking really perky. 

In the year to March, the average sale price of a UK property increased by 2.1%, up from 2% the previous month, new data from the Office for National Statistics shows. In London, house prices were up 4.7% – the largest annual increase recorded in the capital since December 2016. The same figure stands at 2.2% England-wide, 1.1% in Wales, 1.5% in Scotland, and 3.8% in Northern Ireland.

However, before you get too excited/infuriated about all this [delete to taste and/or housing status], two warnings. One is that the average price actually fell from February to March. Only by 0.2 per cent, but nonetheless – that suggests the boom may have been wearing off even before lockdown began.

The other is that all this data is meaningless because the pandemic is going to hit the housing market the same as it’s hit everything else. The unemployment rate is through the roof, consumption has collapsed, and there’s no end in sight – so what the housing market was doing before lockdown kicked in feels quaintly irrelevant. Yahoo Finance UK has covered this story as “London house prices increase at fastest rate since 2016”, a headline that has the virtue of being technically true, while also feeling a lot like celebrating a record-breaking 99 years of peace in Europe immediately after Archduke Franz Ferdinand got shot. 

So – prices may well be about to crash. That’s great news for buyers, right?

For some, sure: those with decent incomes and a deposit that wasn’t quite big enough before may find they can clean up. For many people, however, things may not change that much, because their own incomes are likely to take a hit and banks may be less keen to lend. 

Or to put it another way – even if housing gets cheaper, that won’t necessarily make ownership more affordable.

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Incidentally, property website Rightmove suggested earlier that banks should consider accepting lower deposits if they want to prevent the market from crashing. That feels a lot like it’s hoping other businesses will take more risk so that it doesn’t have to, but I guess it’s worth a shot.

Jonn Elledge was founding editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.


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