House prices have accelerated since the start of the COVID-19 pandemic globally. The rise in house prices can be attributed to several factors witnessed since the onset of the pandemic. Most countries put in place new monetary policies, and expansionary fiscal was established to revive the economic statuses in various countries. Before the pandemic, the real estate industry prices were lower than now, and no individual could have predicted the turn of events.
In the United Kingdom, the housing market was significantly impacted during the first lockdown period, resulting in the property industry’s closure. The property prices hit a new high of 13.2%, increasing yearly in June 2021 and remaining at a 10.8% increase between December 2020 and December 2021.
The United Kingdom’s increase in house prices can be attributed to the increased demand that outnumbered the available housing stock in the market. Additionally, other factors were the incentives of low mortgage rates and temporary stamp duty incentives. This meant that no stamp duty fees were required for assets costing £500,000 or less from 8 July 2020 – 30 June 2021 or £250,000 or less from 1 July 2021 – 30 September 2021.
The original assumption of multiple experts at the onset of the COVID-19 pandemic was that the downtrend would significantly impact the residential property industry in income because of the economic fluctuations. However, the price of houses has increased globally since the pandemic started.
The accelerating trend in housing prices can be linked to various factors, such as an increase in demand for things catapulted by the nature of the pandemic. For instance, the confinement of people in their residents and the adoption of work from home policy led to changes in buyers’ preferences concerning the location and type of the homes they needed. The fiscal policies established in the pandemic period cushioned the impacts on the domestic income, although to a less or great extent based on the particular country.
In multiple developed economies, households accumulated significant savings because of the restrictions and strict lockdowns on some activities. Subsequently, a section of the savings has been put into a real estate venture. Additionally, the decline in building activities in the second part of 2020 impacted the number of assets delivered, which increased house prices, particularly in markets with a short housing supply.
Another factor that impacted the rise of house prices was the lessened interest rates anticipated to remain that way for a longer period. This resulted from the established monetary policy to regain previous economic status in various countries. Besides, according to various researches, it is expected that house prices should increase when the mortgage interests levels drop. Most homeowners can afford a high-priced domicile for similar mortgage rates. Real estate venture is more captivating in an ecosystem with low returns, and it is evident that the pandemic reinforced the relationship between house prices and interest rates.
The upward trend in expanding the worldwide house price catalogue is prevalent in superior economies except for Japan; however, the rising rate varies largely. Some countries registered a fast house price boom in 2020, while others had slower growth. For example, in 2020, Canada had an increase of 8.3pp to 8.2%, while Luxembourg increased by 4.4pp to 14.5%, making them stand out in the first group. They were closely followed by Denmark, the United Kingdom, France and Italy, where annual price growth increased by at least 2%.
As per the International Monetary Fund’s (IMF) Global House Price Index, 75% of countries indexed recorded prices by the final quarter of 2020, with over a third seeing a rise of over 5%.
The List of Countries Where House Prices Accelerated In 2020
• United Kingdom
• United States of America
In some countries, housing prices increased faster before the pandemic leading to their acceleration booming in 2020. For example, Luxembourg’s residential industry, whose costs did not overheat throughout the 2000-2007 expansionary phase, developed exponentially and less or more gradually in 2019 by 10.1%. It accelerated significantly in the past year, with 14.5% in 2020 to standards similar to an overheated sell.
The housing industry continues to gain momentum, and there are positive predictions for the near future. In the United Kingdom, house prices continue to rise, considering the government incentives have been significantly withdrawn as the cost of living and interest rates continue to increase.