Despite some of the post-Brexit economic turmoil in the UK, the UK real estate market continues to perform well.
In September, with a 7.4 percent plus compared to the same month last year, the strongest price increase in 14 years was measured.
"The average home is now more expensive than ever," said Russell Galley, manager at Halifax Bank, which calculates the house price index.
Business correspondent based in London.
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On average across all regions, a typical house that is on the small side of the island now costs £ 267,500, according to the Halifax Index.
Since the end of the first corona lockdown in the summer of 2020, prices have risen by £ 28,000.
There are huge differences behind the national average.
A house or apartment in London costs twice as much as in the rest of the country.
Prices well over a million pounds are the norm in better neighborhoods.
Cheap mortgage loans
Forecasters did not expect the strong upturn in the real estate market in the year and a half after Brexit and especially during the Corona period. "That was a surprise," admits Andrew Burrell, Head of Real Estate Research at Capital Economics in London. "A year ago we would not have believed that all of this would happen." Even during the deepest Corona recession, the market did not slide.
Several factors boosted prices during the Corona period. On the one hand, home buyers benefit from the low interest rates and cheap mortgage loans. On the other hand, the state has supported the labor market. Many Brits have wanted more living space since the Corona lockdowns, stresses Halifax manager Galley, and the demand for larger houses has increased. At times there was talk of fleeing to the countryside. In addition, there was another special “pandemic effect”, explains Burrell: During the lockdowns, the middle and upper classes saved more money than usual, and many now want to spend this money.
Tax policy was also an important factor.
Finance Minister Rishi Sunak has temporarily suspended the real estate transfer tax in order to support the housing market, the British speak of a “tax break”.
Up to half a million pounds of purchase price, the 3 percent tax was waived.
The tax break expired at the end of September - this has encouraged many buyers to take action quickly.
“Even after the tax break is over, we don't expect a crash, at most a slowdown in price increases,” says Burrell.
A small home is difficult to afford for first-time buyers
The real estate and construction industries are important to the island's economy. Most Britons are homeowners, more than two-thirds own a home, which is the bulk of their wealth. The development of prices is therefore also a political issue. Pessimists predicted a slump for Brexit, but this did not materialize. Only in London have prices dropped temporarily, especially in the top segment. The national average price increase slowed to around 2 percent in 2018 and 2019, before picking up sharply in 2020 and 2021.
Burrell believes it is difficult to say how much the Brexit, which took place on January 1, 2020, really affected the real estate market. Some EU citizens have left the country, particularly those from Greater London. The talk was of several hundred thousand EU foreigners who had moved away. Less immigration to Britain is expected in the future. "The demographic trends are likely to depress the market a little," says Burrell. The high rents in London have fallen somewhat.
In the top segment of absolute luxury real estate, however, there is currently no dent, on the contrary, prices are climbing further record highs. Last spring, a Chinese billionaire paid more than 210 million pounds (245 million euros) for a seven-story, fine old building with 45 rooms in the posh district of Knightsbridge. Super-rich Asians, Russians and Arabs buy luxury apartments and second homes in the British metropolis. According to real estate agent Beactive, there are currently 317 properties on the market with asking prices above £ 10 million. It is said that the global elite are increasingly buying in London.
At the lower end of the market, on the other hand, there are increasing complaints that a small home is difficult to afford for first-time buyers because of the increased prices.
Next year economists expect key interest rates to rise.
That could dampen the market.Keywords: