Property prices in the UK rose by £13,000 over 2020 to a new average high of £245,000. The Bank of England’s October 2020 report showed that the number of mortgages authorized for home purchases rose to 97,500 in October, the highest level since September 2007. The residential real estate market in the UK and London in particular is experiencing an unprecedented influx of buyers.
Mansions with plenty of open space are in particular demand. With the pandemic, people who have to spend more time at home have become more appreciative of personal space and comfort. On a percentage basis, from October 2019 to October 2020, prices rose 5.4 percent. Notably, home prices were up 6.8% and apartment prices were up 2.3%.
With the Brexit story still unfolding, there is a disconnect in fundamentals between the real estate market and the economy as a whole. As the economy slows and the number of people laid off by layoffs rises sharply, the real estate market is picking up. Across the U.K., real estate prices are rising almost eight times faster than they were a year ago. Even in the wildest days of the boom before the 2009 financial crisis, prices did not rise this fast.
Mortgage commitments are still running at their highest levels since the 2009 financial crisis, and there are no signs yet that this excessive demand is stabilizing.
The main reason for this boom is the abolition of Stamp Duty for buyers of properties under £500,000. This is unprecedented given that the Stamp Duty exempt purchase amount was £125,000 until 2 July 2020.