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End of Lockdown Signals New Start For UK Property

In February, UK Prime Minister Boris Johnson announced the government’s four-stage roadmap out of COVID-19 restrictions. Housing experts are predicting that this also signalled the start of a new era for UK property.

Summary:

  • April 2021 has seen UK life start to get back to ‘normality’, with outdoor dining, non-essential shops, pubs and the beauty industry reopening, and even staycations allowed again.
  • Initial figures from across the housing industry indicate that UK property is reacting strongly to the ease of restrictions, with a ‘post COVID-19’ boom on the horizon.
  • Housing experts and professionals are predicting that the COVID-19 pandemic has changed the way we live, and how we see our homes, forever.

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Confidence in the market

Since COVID-19 became part of the lives of millions of people across the world, the UK government has always made it clear how important the country’s housing market is to the wider economy.

The housing market was re-opened earlier than many others around the globe and the government initiated extra support such as the Stamp Duty Land Tax (SDLT) that was introduced in July 2020 and extended in March 2021.

Looking at the recent data, this support appears to have made a huge difference to the UK housing market, confidence amongst professionals is high with the continued growth:

  • The latest house price index from Halifax shows that property prices increased by 1.1% between February and March 2021 and they are also now 6.5% higher than in March 2020.
  • Recent data from the Office of National Statistics demonstrates that the UK economy returned to growth in February, with output rising by 0.4%. Construction was the highest growth area (rising by 1.6%), providing further support to the UK housing market.
  • The latest economy and property market update from the Royal Institute of Chartered Surveyors (RICS) suggests that property activity is set to increase as lockdown restrictions are lifted. Specifically, their data is showing that tenant demand is remaining firm, with rents projected to rise by around 2.5% nationally over a 12-month time period.
  • Homebuyers and Investors are flocking to property portals, with Rightmove showing record days of activity in March and April. On Wednesday, 7th April more than 9.3 million people visited the property portal.

Employment figures are also thought to be a key indicator of the future strength of property market. Unemployment figures fell in March 2021 and the hope is that as businesses re-open, these figures will fall even further.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Low interest rates are also allowing mortgage borrowing to continue and the fears of an immediate economic shock caused by Brexit appear to be unfounded.

Confidence in the UK in general appears to have been bolstered by the government’s successful roll-out of the vaccination programme and people are optimistic that the country is hopefully on an ‘irreversible path’ out of lockdown. This allows people to more assuredly turn their attentions to matters such as buying houses and making investments.

Overseas investment

Overseas sentiment in the UK market seems to be following the trend of domestic confidence. According to data from estate agent ludlowthompson, the number of as landlords owning property in the UK has reached a five-year high. The number is currently at 184,000 which represents a 19% rise over the past five years.

While there are forthcoming implications from impending tax changes in the buy-to-let sector for overseas buyers, what the COVID-19 pandemic and Brexit show us is that the UK property market is robust enough to attract overseas investment even in the face of adversity.

Future of UK housing market

Many housing experts are forecasting that the market will be changed forever due to the effects of the COVID-19 pandemic. Working-from-home is no longer a perk given by a few choice employers but is being seen as a ‘normal’ way of working that will continue to be a big feature of our lives.

This is having a big effect on how people see their homes and how they need them to function. Many are now desiring bigger living spaces so that they can have a dedicated ‘working-from-home’ area, and the need for outside space in the form of a garden or balcony is also likely to have major implications on the UK residential scene.

While there are many external factors that can be influential on the UK housing market, the reality is that it is a sector that will always bounce-back after a dip. With current house prices growing, demand remaining strong, and the UK government seemingly determined to ensure its strength, the future of the UK housing market is looking bright indeed.

Source: Select Property

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Covid-19 has changed what buyers and renters find essential

More than a quarter of the UK’s renters and homeowners (26%) have found their property needs have changed since the outbreak of Covid-19, according to new research from Gradual Homeownership provider, Wayhome.

After more than a year of remote working and months of non-essential shops and eateries being closed to the public, previously “high-valued” property amenities have slid far down the priority list. Indeed, among the renters and homeowners whose property requirements changed amid the pandemic, the least important features are now having an easy commute to work (17%), being close to shops and restaurants (17%) and living near public transport (14%).

Wayhome’s research indicates a new set of property amenities will take precedence once lockdown lifts, given the prolonged time spent at home and likelihood of hybrid working for office-workers going forward.

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Indeed, when asked which property features had become more important since March 2020, more than a quarter (26%) said having the space for a proper home office was increasingly critical. And, given the fact so many working parents have had to juggle work and childcare commitments, the need for decent office space rose to 30% for parents, compared to 22% of non-parents.

As well as specific space for a home office, lockdown has caused a general desire for more space, be it for work or leisure. Almost a third (30%) of all homeowners and renters wanted more space in general, and a quarter (24%) said having a bigger bedroom was necessary.

And as more of us have spent time indoors, having access to a private garden has become increasingly important. 36% said this had become more important over the past year – a more popular desire among older people, especially 55-73 year olds at 52%, falling to 43% of 43-54 year olds and 35% of 24-42 year olds.

Similarly, a fifth (21%) of all respondents felt living near a public garden or green space was important to them, and the same number prioritised being near friends and family – a feature that resonated higher among women (25%) than it did for men (17%).

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Features which have become more important post-CovidFeatures which have become less important post-Covid
Garden (36%)Having an easy commute to your workplace (17%)
More space (square footage) (30%)Being close to local shops/pubs/bars and restaurants (17%)
A home office (26%)Being near public transport (14%)
Bigger bedrooms (24%)Balcony (13%)
Being near my friends/ family/ support network (21%)A home office (13%)
Being near public garden/ green space/ woodlands (21%)Off-street parking (13%)
Having an easy commute to your workplace (17%)Playroom for children (12%)
Being close to local shops/pubs/bars and restaurants (17%)Bigger bedrooms (12%)
Playroom for children (15%)Being near my friends/ family/ support network (12%)
Off-street parking (15%)More space (square footage) (12%)

This research looking at the impact of the pandemic on people’s changing property needs comes ahead of the launch of a report by Wayhome on the challenges facing the UK’s renters and homeowners.

Nigel Purves, CEO of Wayhome commented: “When you’re narrowing down your search for the perfect home to rent or buy, most of us will have a wish-list, usually split into the “essentials” and “nice-to-haves”. Our upcoming report makes it clear just how far these wish-lists have changed as the pandemic rolled on. In most cases, we’ve seen a complete reversal, with potential renters and homeowners prioritising the things that would make living and working in that space the most comfortable and fit for purpose.

“While having the flexibility to pick and choose a desired property based on its amenities and special features doesn’t seem too much to ask – for a lot of people it’s near impossible. Far too often renters are being driven into buying smaller first-homes or properties in locations that aren’t suitable. Despite earning a good income, affording a deposit big enough to secure a suitable home and hitting the affordability criteria set by mortgage lenders is unsurmountable – as evidenced by the fact full-time workers would need to spend at least 7.8 times their annual earnings to be able to afford a home in England*.

“With the end of lockdown in sight, now would be an opportune time for the industry to reassess the actual needs of renters and homeowners post-pandemic and support innovative and alternative routes that get more people onto the property ladder.”

BY MARCO CALLEGARI

Source: Property Wire

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Tenant rent arrears decline but industry urged to remain cautious

The percentage of tenants in rent arrears decreased during October and November, according to research from PayProp.

Payment data from the rental payment platform also shows that the typical percentage of rent in arrears fell consistently from August to November.

However, with strict COVID-19 restrictions across large parts of the country set to remain in place for the foreseeable future, PayProp said letting agents and landlords should prepare themselves for arrears increasing again in the first few months of 2021.

PayProp’s platform data offers financial evidence that the percentage of tenants in arrears dropped to 11.8% in November, down from 12.2% in October.

This is the lowest percentage recorded since before the spring lockdown in March when 9.6% of tenants were in arrears.

The number of tenants in arrears spiked during September, to 15.1%, although this remains below the 2020 peak of 15.5% recorded in May. A rise in September could be due to increased redundancies as official figures showed that 11.3 people per 1,000 employees were made redundant as the pandemic continued to hit businesses.

Neil Cobbold, chief sales officer at PayProp, said: “The general downward trend of tenants in arrears over the autumn and winter months of 2020 is positive news for letting agencies and landlords.

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“Falling arrears suggest that even though restrictions were tightened once more towards the end of the year, society has adapted to the ‘new normal’.”

The research shows that the percentage of rent owed by tenants in arrears fell to 121.1% in November, down from 124.4% in October and 125.5% in September.

The level of rent owed by tenants in arrears in November was equivalent to the level recorded in May but didn’t quite reach the peak of 127% recorded in August.

Meanwhile, 77% of tenants paid off some or all of their arrears between September and October, while a further 50% paid back arrears between October and November.

Between August and November, the percentage of tenants reducing their arrears averaged between 44% and 48%, while the percentage increasing the amount they owed also remained high at an average of 45% to 49%.

Cobbold added: “Our research shows that on the whole, tenants who end up in arrears try to clear them. Even if they cannot afford to pay back the full amount, renters are generally open to reducing what they owe through affordable repayment plans.

“A particularly high level of tenants reducing their arrears during September could have been linked to a resumption of evictions in England and Wales, with renters agreeing to pay back what they owe in order to avoid their landlord seeking repossession.”

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

Despite the reduction in arrears recorded between September and November, the situation could worsen again in the early part of 2021.

PayProp said nthis is partly due to a seasonal bump in arrears as people spend more over the festive period. Meanwhile, with millions of people under the strictest tier 4 restrictions, more jobs could be at risk.

Cobbold said: “Although the situation improved towards the end of 2020, current market conditions mean that letting agents and landlords should be cautious at the start of 2021 as things could get slightly worse before they get better.

“Agents must ensure they have the systems in place to deal with arrears, while facilitating effective communication between landlords and tenants.”

Although arrears could rise again in the coming months, 70% of tenants surveyed by PayProp said COVID-19 and subsequent lockdowns have not made it more difficult for them to pay rent.

“Restrictions put pressure on sectors such as hospitality, but they also give tenants the opportunity to save money which would otherwise have been spent on socialising.

“With the extension of the furlough scheme until the end of April, as well as the ongoing national rollout of a COVID-19 vaccine, there is optimism that tenant finances will be in a stronger position by the middle of 2021,” Cobbold concluded.

Source: Mortgage Introducer

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COVID-19 Impact on the Buy to Let Market

Due to the COVID-19 health pandemic, the UK is in a recession and many industries have been heavily impacted by lockdown restrictions and other factors that have prevented them from being able to operate as usual. The UK property market has seen some strange results, with house prices rising to an all-time high.

With Government initiatives such as the stamp duty holiday in place to help keep the property industry going, in September 2020, mortgage applications reached the highest rate they had been in 12 years.

However, property experts are predicting an imminent crash, particularly when more job redundancies take place, with an already rapidly increasing unemployment rate in the UK.

How is Coronavirus affecting the Buy to Let market?

It has been an unusual time for BTL Landlords and property owners. After facing big changes to tax relief changes over the last few years and also the requirement for capital gains tax bills to be paid within 30 days, they had already seen a lot of change.

However, the impact of COVID-19 has shaken up the UK property market even more. As part of the initial lockdown restrictions, property viewings were unable to take place and house moves not allowed. This naturally had a big impact on Landlords that were in the process of finding tenants.

In addition to this, the Government protected existing tenants by introducing an eviction ban which lasted for six months. This ban put many landlords into a very difficult situation where they were unable to take legal action against tenants that were unable to pay their rent, or who had broken the terms in their rental agreement in another way.

The ban was lifted on 20 September 2020 but landlords were told they must give tenants six months’ notice for any eviction. This has led to significant financial losses for many landlords who are losing out on rental income.

The Government also protected tenants by introducing rental payment holidays for tenants that were financially affected by the health pandemic.

Support for Buy to Let Landlords

While the Government prioritised the protection of tenants in these moves, they did also provide some measures to assist landlords. To help to deal with the financial impact of the tenant rent holiday, landlords were able to request mortgage payment holidays. However, this did not help landlords who owned the property outright and did not have a mortgage on the property.

A YouGov poll recently revealed that 22% of private landlord in England have lost rental income as a result of the COVID-19 pandemic. The average loss was between £751 and £1,000 and there could still be a longer-term financial impact as the UK faces prolonged knock-on effects from COVID-19.

The current challenges Buy to Let Landlords face

The furlough scheme helped many tenants to keep up with their rent payments but with the scheme ending at the end of October and support packages only expected for businesses that are forced to close, many tenants will no longer be able to afford rented accommodation if their employer is forced to make them redundant.

The pandemic is affecting different areas of the country and different types of landlords in a variety of ways. For example, landlords who are renting to students are already seeing the impact of universities moving over to online learning or students choosing not to live in rented property while the pandemic continues.

There has also been a reduction in overseas students, who have been restricted by travel rules that would normally be looking to live in rented accommodation, so the current situation with university students is having a big impact on existing landlords who rent to students.

Many of these Buy to Let Landlords who have multiple properties in student areas that have been unable to fill their properties have had to adapt and change their tenant type. However, this itself can be costly, as the accommodation expectations of a young professional is usually going to be a bit higher than the expectations of students, so BTL Landlords are facing costs to give properties a refurb to raise the standards.

In areas where there have been stricter local lockdown restrictions, there is a bigger impact on jobs, so Buy to Let Landlords with properties in these hard-hit areas will face more challenges than those with properties in areas less affected.

Some BTL Landlords have made the decision to sell their property while the house prices are so high but this has not been possible for those landlords with tenants that they are unable to get to move out of the property.

What will happen to the Buy to Let market over the next 12-18 months?

While the current situation can feel very negative as a BTL Landlord or property investor, this situation will change and there will be brighter times ahead. With house prices being so high right now, it is not necessarily a good time to buy properties on the open market.

What we are likely to see however, is that there will be an increase in repossessions at some point in the future, with some properties going to auction and being available at good values. This of course represents a good opportunity for investors looking for a Buy to Let property without paying the current high property prices.

Buy to Let Opportunities when the housing crash happens

Property experts are anticipating a housing crash in the next 12- 18 months, and while there are differing predictions for the date this will happen, most predictions are falling within the 12-18 month time period.

What this means is that property investors looking to buy cheap properties and rent them out will be able to buy at a time when prices are much lower than usual. So, in the time leading up to this, these prospective landlords should be using their time wisely, to work out the best areas to buy property in and to factor into account the changes that COVID-19 has brought to the Buy to Let market. For example, the reduced demand for student accommodation and higher unemployment rates in the areas worst impacted by the pandemic.

What is happening to Buy to Let Mortgage rates?

In April, just after the first lockdown was imposed, the number of Buy to Let mortgage products fell considerably. The UK base rate now sits at 0.10%, meaning that interest rates for loans including mortgages are very attractive right now. However, after a very low dip in rates in July, mortgage rates have been increasing.

Research shows that rates have fallen for borrowers with existing investment properties, with the average two-year fixed rate at 75% reducing from 2.34% to 2.17% over the last 12 months.

These lower rates also present an opportunity for BTL Landlords to release some equity from their property or to benefit from re-mortgaging to secure a lower interest rate and therefore reduce their monthly mortgage repayment. There are definitely some good Buy to Let mortgage rates available and a broker can help you to find them.

Is Buy to Let still worth investing in?

Landlords are still able to make a good profit on renting properties and according to the Office of National Statistics private rental prices paid by tenants has increased by 1.5% in the 12 months up to August 2020. So, for those landlords who have not encountered the problems with tenants not paying rent, or not being able to fill student accommodation, this year is fairly positive from a rental price point of view.

Some property rental experts are predicting that there will be high demand for rental properties for the foreseeable future, due to the fact that many people will not be able to buy their own property. Therefore, BTL Landlords will be able to continue to make enough money to make it worthwhile doing.

For people who are considering getting into the Buy to Let industry for the first time, waiting for house prices to reduce and then taking advantage of favourable interest rates will provide a really good business opportunity.

When you are looking for the best Buy to Let interest rates, it is a good idea to use a specialist Buy to Let mortgage broker to help you to find the best deals available. When you take out a Buy to Let mortgage, the offer you receive will take into account how much rental income it is expected that the property will generate for you. So, if rental prices do continue to rise, this should enable you to get a Buy to Let mortgage offer that allows you to buy a property in an area where there should be high tenant demand.

Using a whole-of-market Buy to Let mortgage broker will give you access to some of the best Buy to Let mortgage deals available, many of which will not be available direct to borrower. Many brokers, such as UK Mortgage Broker have exclusive deals that will help you to keep mortgage payments to a minimum and therefore enable you to make more profit through renting a property out.

Another benefit of using a specialist BTL broker is that they can find you the maximum loan-to-value deals, which are ideal if you do not have a large amount of deposit to put down against the property. Find out more about the benefits using of a Buy to Let mortgage broker.

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UK housing market at decade high after COVID-19 bounce back

The UK housing market had its busiest month for a decade in July as the value of property sales reached a record £37 billion, according to Rightmove.

Agreed property sales increased by 48 per cent compared with the same month in 2019 and were 20 per cent higher than the previous record noted by Rightmove’s monthly survey in March 2017. The momentum in the market has continued this month, with the latest weekly figure revealing a 60 per cent hike in sales.

Rightmove said that the £37bn of agreed sales that it had recorded was the highest since it started tracking the data a decade ago. Its report is the latest evidence of bounce back in the UK housing market since the coronavirus lockdown measures were eased and Rishi Sunak reduced stamp duty by raising the threshold at which buyers start to pay the tax to £500,000.

Pent up demand for property is driving the soar in housing market activity, the stamp duty cut and people rethinking where they want to live because of the nature of life under lockdown and the possibility of working from home more regularly.

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However, while Rightmove and other reports have suggested that the market is enjoying a rebound, economists fear that it could come to a swift end by a rise in unemployment and further economic slowdown when government support schemes come to an end.

Furthermore, the housing market could be hit with a wave of home repossessions once banks end the mortgage holidays that they have offered during the pandemic, The Times reports.

The stamp duty holiday is also due to end at the end of March 2021. Banks across the UK are also anticipating a decline in house prices with their recent financial results revealing various plans put in place to account for losses stemming from this. Metro Bank said it expected prices to drop by 14.6 per cent.

Rightmove said that the average asking price on a property in the UK was now £319,497, slightly lower than the record high of £320,265 in its July report.

The mass city exodus has helped to push prices to record levels in Devon and Cornwall, but prices in London have fallen by 2 per cent month-on-month, with some landlords opting to put their city flats on the market in the wake of a slump in the number of tourists and students.

Nevertheless, the 0.2 per cent monthly drop in prices is lower than the average of 1.2 per cent usually recorded at this time of year as activity slows in the market.

Miles Shipside, Rightmove director and housing market analyst, said: “There have been many changes as a result of the unprecedented pandemic and these include a rewriting of the previously predictable seasonal rulebook for housing market activity and prices. Home movers are both marketing and buying more property than we have recorded in any previous month for over ten years, helping to push prices to their highest ever level in seven regions.”

Source: Scottish Legal

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Lenders pledge ongoing support for those affected by Covid

Mortgage lenders are committed to supporting borrowers who are reaching the end of a three-month payment holiday to choose the next steps that best suit their needs, according to UK Finance.

This comes after HM Treasury confirmed last week (May 22) that mortgage customers, who were struggling to pay due to the coronavirus, can extend their payment holiday for an additional three months or begin to make reduced payments.

Figures from UK Finance showed that an equivalent of one in six mortgages are currently covered by a payment holiday, with more than 1.82m payment holidays having been issued as of May 20.

The industry body said it was “important that customers receive the support that is right for them” and for those who had already taken a payment holiday, an extension “may be appropriate in some circumstances”.

It encouraged borrowers who are concerned about their ability to pay to contact their lender and consider the “full set of options available to them”.

These include reduced payments, a move to interest-only payments for a period, extending the term of the mortgage to reduce payments, taking a payment holiday if the customer has not already done so or a further extension of the payment holiday.

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Stephen Jones, UK Finance CEO, said: “Mortgage lenders are committed to providing those borrowers nearing the end of their three-month payment holiday with help and flexibility in choosing the next steps which best suit their needs.

“The industry looks forward to regulatory guidance being finalised swiftly to ensure both borrowers and lenders can plan over the coming weeks.

“Meanwhile those borrowers who have already taken a mortgage payment holiday and can afford to make payments are encouraged to do so, as this will reduce the level of their repayments in the long run.”

In response, Vim Maru, retail director at Lloyds Banking Group, said: “We are already proactively contacting our customers who will be reaching the end of their repayment holidays to support them in restarting their payments.

“For those who may continue to be financially impacted, we will offer a range of support based on their current financial circumstances.”

But Dominik Lipnicki, director at Your Mortgage Decisions, said he would welcome a “more uniformed approach from lenders when it comes to the ease of application [of a payment holiday] and how these borrowers are looked at in the future when remortgaging or buying a new home”.

Research from YouGov for Nationwide found that 21 per cent of homeowners in April were worried about not being able to keep up with mortgage payments, and 14 per cent feared losing their home.

Lenders have also committed to continue suspending involuntary repossessions for residential and buy-to-let customers until October 31, as set out in the Financial Conduct Authority’s draft guidance for lenders published last week (May 22).

On the day the FCA published its draft guidance, Nationwide pledged that none of its mortgage customers, who fell into arrears as a result of Covid-19, would see their home repossessed until the end of May 2021, if they worked with the provider to “get their finances back on track”.

Joe Garner, chief executive at Nationwide, said: “As a mutual, founded to help people into a home of their own, this is what building societies have always been about. We hope this additional support will provide extra flexibility to those who most need it, to help get them back on track.”

Mr Lipnicki added: “The fact that repossessions are on hold is a very welcome relief for affected borrowers and I am sure that more flexibility will need to be applied even after October 31”.

By Chloe Cheung

Source: FT Adviser

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Most brokers think lending will recover to pre-COVID-19 levels within 9 months

Three quarters (77%) of brokers reckon mortgage lending will recover to pre COVID-19 levels within 9 months, while half (51%) believe it will happen within 6 months, research from Smart Money People has found.

Appointed representatives are more optimistic than directly authorised brokers, with 59% of ARs predicting that lending levels will recover within six months, compared to just 37% of DAs.

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Michael Fotis, managing director of Smart Money People, said “Tentative steps are being taken to get the economy moving, and many lenders are talking loudly about their appetite to lend.

“That said, with job security likely to be a concern for many consumers, and predictions that house prices may decline by up to 13%, it’s really hard to see customer appetite for new mortgage lending returning until 2021 at the earliest.”

Brokers focused on the equity release market proved to be particularly sceptical of a full recovery, as just 19% felt lending levels will bounce back within six months.

BY RYAN BEMBRIDGE

Source: Property Wire

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UK house prices surge post-election, but Covid-19 dampens outlook

House prices hit a fresh high in February, data published on Monday showed, as consumer confidence improved following last year’s decisive general election.

According to Rightmove, the UK average new seller asking price hit a record high of £312,625, a 1.0% month-on-month increase that pushed annual price growth up to 3.5%.

The number of sales agreed rose by 17.8%, the highest for the time of year since 2016. Overall, properties sold an average of 6% faster nationally and 15 days more quickly in London.

The UK housing market – and the capital in particular – has struggled in recent years. Ongoing political turmoil over Brexit and successive general elections dampened consumer confidence and saw prices dip as sales fell away.

The Conservative’s decisive general election victory and the UK’s subsequent departure from the European Union have helped ease that uncertainty, however.

In London, the price of property coming to market jumped 5.1% year-on-year, to an average of £638,826, the highest annual growth rate since May 2016. The number of sales agreed ratcheted ahead 34.4%, the highest level for four years.

However, the survey conceded that going forward, the outlook was now less certain.

“The market has been waiting for several years for a window of certainty, and 2020 seemed set to be the year when many would look to make a move and satisfy their pent-up housing needs,” said Miles Shipside, Rightmove director and housing market analyst.

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“However, the current fast pace of the housing market could now be temporarily affected by the spread of the Covid-19 coronavirus. We expect that housing market statistics, like other economic indicators, could be prone to volatility over the spring and summer.”

Marc von Grundherr, director at London estate agent Benham and Reeves, said: “London is now back with a bang. An annual increase in asking prices of 5.1% is the highest level that we have seen in years, and is as a consequence of buyer demand coming back strongly in all price ranges.

“Covid-19 is of course a significant issue, albeit that enquiry levels and viewings do seem to be holding up for now, and we should remain optimistic for swift resolution to the pandemic followed by a robust response from markets including property.”

Rightmove measured 111,464 asking prices, which it said was around 95% of the UK market, for its latest monthly survey. The properties were put up for sale between 9 February and 7 March.

By Abigail Townsend

Source: ShareCast