UK house prices climbed by 8.5% during 2020, the highest annual growth rate since October 2014, according to new official figures.
The average UK house price reached a record high of £252,000 in December 2020, pushed up in part by the stampede to beat the stamp duty holiday that is set to finish at the end of March this year.
The Office for National Statistics said north-west England had seen the highest growth, of 11.2% last year, while prices in London rose just 3.5%. The average property price in England in December was £269,000.
In Wales prices grew 10.7% to an average of £184,000. Scotland had an 8.4% increase to an average of £163,000, while in Northern Ireland a house would typically set buyers back £148,000 – up 5.3% on the figure for December 2019.
The need for more home space during the year, when millions of people worked from home due to coronavirus lockdowns, appeared to have been reflected in house prices. The ONS said the average price of detached properties rose 10% last year compared with the 5% growth for flats and maisonettes.
“Recent price increases may reflect a range of factors, including pent-up demand, some possible changes in housing preferences since the pandemic, and a response to the changes made to property transaction taxes across the nations,” the ONS said.
Although average London prices were up by 3.5% over last year, prices fell in the capital by £5,000 between November and December, despite a UK-wide price increase of 1.2% over the month.
In July 2020, the chancellor, in a bid to get the property market moving, announced a stamp duty holiday, releasing property purchases in England and Northern Ireland up to the value of £500,000 from tax payments. The tax-free thresholds for Scotland and Wales were £250,000. The tax holiday is due to end across the UK on 31 March 2021.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said there were already signs that the market was cooling. “Early calculations from Halifax are that house prices fell back 0.3% in January, while the RICS survey showed sales had plummeted, and estate agents expect things to get worse as we go through the spring.
“A shortage of properties on the market should keep prices from falling, but there’s not going to be a great deal of enthusiasm for more rises.
“The chancellor could breathe some new life back into the market in the budget if he makes some kind of concession for people mid-sale when the stamp duty rules change. However, there’s no guarantee he’ll do this, and, even if he does, buyers and sellers may be reluctant to get back into the race.”