What is the average house price in the UK in 2021?

2020 presented unprecedented challenges for individuals, businesses and investors. Despite uncertainty from the ongoing coronavirus pandemic, the property market appears to be recovering.

In November 2020, residential property prices experienced the highest levels of growth in four years, with an increase of around 6.9%. While growth dropped to 6.4% in January 2021 - as can be expected after the post-Holiday spends - the property market throughout the year has witnessed growth of 0.7% each month, more than making up for January’s slight shortfall. By March 2021, average house prices had reached £256,400.

However, the questions remain: can the property market in the UK continue to maintain this level of momentum? Will property investors be able to look forward to another year of gains? And crucially, could unforeseen developments negatively impact the property market, thereby reversing the price increases enjoyed over the past year?

Average house price 2021: will house prices drop in 2021 UK?

If you are intending on buying or selling a property, it’s important to understand what could affect house prices and whether now is the right time to make a move. It’s also worth remembering that if house prices drop, it’s not all bad news. Whether you’re a seasoned property investor or a first-time buyer, house price adjustments can be beneficial. A drop in the price of housing in an area you wish to purchase in could allow you to secure a property at an affordable price while allowing you to have more capital at your disposal for your next purchase.

On the contrary, if house prices continue to increase as predicted, existing property owners should be able to use their assets for greater collateral.

What will happen to house prices in 2021?

Recent trends suggest there is positive momentum in the property market. The North West is predicted to enjoy the greatest gains (approximately 22%) with prices in the UK overall averaging a 15% increase. London is predicted to benefit least, with house price growth in the capital touted at 5% by 2024.

One of the main factors driving the increase in housing prices is the undersupply within the residential rental market. While this might pose a challenge for renters, it represents a golden opportunity for property investors - particularly across regional areas like the North, where markets are incredibly competitive while still remaining affordable.

The buy-to-let market in the UK is currently worth over £1 trillion, and this is estimated to continue to grow over the next two decades. Research suggests that renters will begin to outnumber homeowners by 2040. The convenience and flexibility of renting and increasing house prices are the two primary factors driving this market.

The continued regeneration of various regional areas throughout the UK has boosted the rental market. A competitive market means that developers are increasingly concentrating on delivering quality over quantity, and the knock-on effect is that rental prices are steadily increasing.

While growth may be slowing down in London, there are still ample opportunities for property investors in areas like Manchester, Leeds and Birmingham to enjoy fruitful returns on investment. Over the past decade, developments in connectivity (such as the forthcoming HS2 railway project) mean that increasing numbers of people are choosing to live and work outside the confines of England’s capital.

Is 2021 a good year to buy a house?

Whether you’re considering buying a home or buy-to-let investment, 2021 could be a good year to consider purchasing a property. The stamp duty holiday currently allows purchasers to save up to £15,000 in stamp duty tax on property transactions and is set to run until September 30, 2021.

For those looking to buy-to-let, living trends in 2021 continue to point to an increased demand for rental properties the millennial "generation rent" should provide an appealing long-term customer base for investors looking to create a property portfolio.

According to research, approximately 40% of millennials are still renting over the age of 30. It is predicted that a third of the wider population is likely to continue renting well into retirement age.

While some critics might consider lifetime rental as a bad thing, it’s worth pointing out that this model is widely accepted across Europe. In Germany, for example, just over 40% of people own their own property. With the demand in the rental sector continuing to increase, experts predict that EU-style property rental agreements will be introduced, which provide increased security and flexibility for both tenant and landlord alike.

Another reason to consider purchasing a house in 2021 is that interest rates are at a historic low of just 0.1%. As a result, lenders are more likely to offer competitive buy-to-let mortgages and other financial products which make the investment process much more accessible, particularly for first-time buyers.

For experienced property portfolio investors, the low-interest rate also has the additional benefit of allowing homeowners to remortgage existing properties to release equity. This allows them to leverage new investments with ease.

Is it a bad time to buy a house UK?

The uncertainty surrounding many businesses and industries across the UK has left many people wondering about the long-term ramifications on employment and earnings. In this context, it is understandable why some might consider 2021 to be a bad time to purchase a house in the UK.

However, despite the challenges of Brexit and Covid-19, property has continued to be one of the UK's most stable asset classes.

Take the original lockdown, for example: when Boris Johnson first announced the closure of all non-essential businesses back in March 2020, the UK stock market plummeted by approximately one-third, while the property market continued to remain relatively strong.

One of the unexpected side effects of the pandemic is that many people have begun to re-evaluate their current living situations. With the rollout of various different vaccines helping to get the country moving again, many people are now putting into practice decisions made over the past year to either move out of their family homes or upgrade to a larger property with a garden. This demand has driven both the home-ownership and rental sectors to grow. In 2021, demand for rental properties has increased by over 20%, with properties being let up to one-third faster than they were at the beginning of 2020.

The emergence of a growing culture of working from home - which looks set to stay post-pandemic - has created a demand for larger, higher-quality rental properties. People are increasingly looking for properties with extra rooms which can be utilised as home offices, and this increased demand for larger properties can in turn provide greater rental yields.

Ultimately, personal circumstances will dictate whether now is a bad time or a good time to invest in property in the UK. For those facing employment uncertainty, holding off on committing to a mortgage may seem like the most sensible option. For those with the capital, such as existing property portfolio holders, there’s never been a better time to invest in UK property.

Improve your property portfolio investments today

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