Country houses for sale

Property Talk: How the property market has changed in the three years since the Pandemic

A raft of new data hit the housing market this week, from a big picture analysis of the market since Covid to numbers which show the biggest annual drop in over a decade and buyers slashing prices. But are things are now getting back on to a more solid footing, as some suggest? Annabel Dixon makes sense of it all.

  • How the pandemic shifted the UK property market

  • Biggest annual drop since 2012 — but latest anecdotal evidence shows solid market activity

  • Buyers ‘have more choice, are taking longer and negotiating harder’

House prices are a popular talking point, aren’t they? We talk about them with people we’re passing the time of day with in the street, with colleagues in the office, with family and friends (they were hotly debated among grown-ups at a children’s party I went to recently). And we often focus on what’s happening to house prices now and what could lie ahead. But it’s worth looking back too, particularly after the last three years.

And that’s what Halifax have done in a new report released this week. When Covid hit, initial fears in the early weeks were that the property market would grind to a halt. Instead, the opposite happened: the so-called ‘race for space’ charged up the entire market, and helped to push the average price of a detached house up by more than £100,000 in five regions of the UK.

‘The pandemic transformed the shape of the UK property market,’ says Kim Kinnaird, mortgages director for Halifax, one of Britain’s biggest lenders. ‘And while some of those effects have faded over time, it’s important we don’t lose sight of the huge step change seen in average house prices.’

Since the start of the pandemic, average UK house prices have shot up by 20.4%, equivalent to £48,620. This compares with a 7.8% increase, or £17,158, during the previous three years, according to Halifax.

Recommended videos for you

Wales recorded the strongest house price growth of any region between January 2020 and December 2022, climbing by 29.3% (£49,227). And in cash terms, the south east of England saw the biggest hike, rising by £69,224 (21.3%).

‘Higher entry point’

Of course, people leaving London in search of better value for money is not a new trend. But the pandemic turbo-charged this levelling-up process for UK house prices, though it’s worth pointing out (as Tom Bill, head of UK residential research at Knight Frank has) that demand was initially skewed towards more picture-postcard locations and larger properties.

‘Heightened demand created a much higher entry point for bigger properties right across the country, and that impact is still being felt today by both buyers and sellers, despite the market starting to slow overall,’ adds Kinnaird.

‘Taking detached houses as an example, average prices remain some 25% higher than at the start of 2020. Even if those values were to fall by 10%, they would still be around £50,000 more expensive than before the pandemic.’

Sellers cutting prices by almost 5%

Separate data this week reveals how recent house price gains are now being eroded as property is now, in general, a buyers’ market.

Sellers are discounting asking prices by an average 4.5% — equivalent to £14,100 — to bag a sale. It’s the largest asking-to-achieved price gap for five years, says Zoopla. It means that sellers are forgoing, on average, a third of their pandemic house price gains: according to the property portal, the average UK home increased in value by £42,000 during the pandemic.

Zoopla’s executive director, Richard Donnell, explains: ‘Many homeowners are sitting on sizable house price gains made over recent years and have more room to be flexible accepting offers below the asking price.

‘Discounts to asking price have widened and while 4.5% discounts are manageable, if these were to widen further then this would point to a greater likelihood of larger house price falls.’

Biggest year-on-year price fall since 2012 — but sales looking solid

House price indices vary, but there’s little shying away from monthly prices stalling and falling. Fresh Nationwide data shows that values dropped by 0.5% in February. It’s the sixth monthly fall in a row, leaving house prices 3.7% below their peak last August. Meanwhile, house prices are down 1.1% year-on-year. It’s the first annual fall since June 2020 — and the biggest annual decrease since 2021.

Knight Frank’s Tom Bill suggests that this figure may not tell the whole story.

‘While most of the economy has moved on from the mini-Budget, the hangover is longer for the UK housing market. It has led to a mismatch between the most recent anecdotal evidence and the latest data,’ says Bill.

‘While last month saw the steepest annual house price decline in more than ten years, activity has been solid so far this year as buyers and sellers adapt to higher mortgage rates.’

Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds: ‘These comprehensive and widely respected figures [from Nationwide] reiterate continuing worries about interest rates and inflation, which are keeping prices in check.

‘However, the market is definitely not in free-fall. On the ground, we are seeing more listings and protracted sales so buyers have more choice, are taking longer and negotiating harder when making offers.’