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Why are house prices rising when coronavirus has made the rest of the economy worse?



Why are house prices rising when coronavirus has made the rest of the economy worse?
House hunters are on the look-out for a bargain - but will it last?.

Property sales slowed to a near-halt during hard lockdown, with estate agents banned from holding viewings and many buyers unable to move in.

There has been a mini boom in sales and lettings since the restrictions were lifted, however, with many people reporting how they struggled to find a place in Bristol due to a backlog of demand.

While other sectors struggle to claw back lost income, the stamp duty holiday has been an effective incentive in keeping the property market moving.

Buyers can save up to 15,000 if they buy before March 2021, but there are increasing calls for the deadline to be extended to ensure there is not a crash.

With the furlough scheme drawing to a close and uncertainty about how long coronavirus restrictions will last, some experts predict that the measures are only delaying an inevitable property downturn.

'Record' sales in Bristol after lockdown
According to a webinar held by Savills Bristol at the end of July, the city has been experiencing "very strong activity" in the residential market.

Andrew Keay, a director in the development team, told his industry colleagues during the meeting: "They're all breaking records - it's been the strongest month on record.

"There has been lots of interest in property in town, in the Bristol suburbs and prime markets, and the summer lull in activity has not materialised.

"There has been a real shortage of supply and a surge of interest in town - it's busier than ever."

Looking at the longer term picture, he acknowledged there had been some "doom and gloom" predictions.

However, he added: "12 years ago [during the 2008 housing crash] there was a pause in activity, but when values did come back, they bounced back very quickly."

He said people buyers had been increasingly keen to find properties with space for at-home working, and outdoor space.

What's happening now?
Rightmove's house price index for October found that the South West had the joint highest monthly rise, when comparing the asking price of listed properties with other regions.

Along with the East of England, asking prices were up 1.7 per cent on the previous month, and 5.5 per cent on the previous year.

The average asking price in the region that month was 327, 841.

Nationally, asking prices were 5.5 per cent higher than they were a year ago, which was said to be a four-year high.

Commenting on the figures, Rightmove's director of property data Tim Bannister said the market trends have been "extraordinary".

What will happen next?
There is still uncertainty about the future of house prices and the demand for property, with so many uncertainties still about how the pandemic will progress.

Many property experts have suggested that as the furlough scheme comes to a close at the end of October, there could be a decline in sales as a result of decreased income.

There could also be a shortage of supply in areas where there is still high demand for housing, as many construction projects have been set back by the restrictions.

According to a national Savills survey at the end of last month, involving 1,400 registered buyers and sellers, 56 per cent of respondents said they are prepared for house prices to fall within the next year.

However, more than two thirds said they anticipate price increases in the longer term, in the next five years.

Almost half predicted a rise of more than five per cent in prices.
Tim Bannister of Rightmove said: "There are still some legs left in the upwards march of property prices. We predict that the annual rate of growth will peak by December at around 7 per cent higher than a year ago.

"Sellers and their agents should be wary of being too optimistic on their initial asking price, as whilst activity levels continue to amaze, there are some signs of momentum easing off from these unprecedented levels."

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