Why did house prices go up during covid?

[Tekkentime]

I remember saying that I expected house prices to fall due to deaths from covid and also because of the forseeable economic uncertainty and expected joblosses during and after lockdown.
To be honest i'm still expecting the economy to really tank so i'm just curious.
Wondering what other people's thoughts are.

Supply and demand. Limited supply so prices go up. Increased demand as people realised they could work from home so they moved out of London or big cities, invested more in their homes etc. Also immigration has rocketed the last few years. More people increases the demand.

Working from home. I expect a lot of people are now working from home some or all of the time, so there would be more demand for houses with an extra bedroom or home office space. Would be interesting to see if prices of one-bedroom flats have dropped compared to other prices rising.

Also people moving out of cities due to home working, as the previous poster said.

It was the demand for larger properties with gardens. Everyone wanted out of flats basically.

Wasn’t there also a temporary reduction in stamp duty that made moving cheaper? I can’t remember the details.

The stamp duty holiday. People put off buying due to economic uncertainty then as soon as the stamp duty holiday was introduced people went crazy trying to nab a property.

Reduction in stamp duty drove demand, plus desires to relocate to bigger properties/less urban areas, plus lack of supply.

1-bed flats in my area haven't dropped at all compared to houses and mine actually sold above asking price during covid.

There's still people who can't afford houses who need 1-bed properties Covid doesn't change that!

Also I saw something on TV last week that said that people couldn't buy much except property during the pandemic.

Short answer is some did, some didn't.

Flats generally dropped, houses increased, because people wanted places with gardens.

A lot of money was pumped into the economy (too much) through stuff like furlough which probably just went on inflating asset prices like houses. Now that money is being taken out (energy, tax rises, cost of living) prices will probably fall again.

my 2 bed flat in London we bought in 2019 hasn't risen in price at all since we bought it but the good thing is neither have the bigger flats. These are flats unaffected by cladding or leasehold issues, as they were built in the 1930s and as they are older, the freehold has often been bought by the residents. I think its because the people who used to buy these flats- teachers, accountants, solicitors,psychotherapists in the early stages of their career can no longer afford to buy them on their earnings alone esp if they are single. They would need parental help. And those with significant parental help would tend to opt for houses even if its further out. I feel DH and I are part of a dwindling group of middle income earners who can still afford to buy in London because we married young and were able to live with family in mid 20s pre DC.

The concept of the property ladder has not only disappeared because FTBs are older and hence need more space and because moving is expensive. There is a wide disparity between those who can buy and those who can't esp in the SE. Those who can buy have higher salaries and/or parental help. 1 in 4 older home owners have used equity release to help their kids buy property, as reported in the telegraph. And when you have an injection of money from your relatives, what you can afford increases and because you can't be sure of another injection of money, people would buy as big as they can. Its different for people who buy based on their incomes at a young age- such people are more likely to buy based on present needs as they do anticipate being able to afford to upgrade as time goes by.

The race for space.

Also the lockdown didn't count when conducting house viewings. We got to travel all over the place looking at houses on gloriously deserted roads.

Plus many people saved a lot due to no commuting costs /nights out etc so I guess that will have helped with getting a deposit together

The market was shut down for a while, then Gov introduced SDLT holiday to stimulate the market, the race for space, lack of supply, particularly large family homes with decent sized gardens, sellers market, all caused a surge in prices.

You could go on house viewings but not visit your mum.

"Supply and demand" arguments turned out to be false, scary to think that people probably based borrowing decisions on this very unsound idea! House sales have plummeted and mortgage applications are down over 30% while the people who would have been buying continue to live somewhere perfectly comfortable no doubt! Prices went up during Covid because interest rates were well under 1%, a very reckless move that has left millions with very very pricey mortgage debt.

It was the stamp duty holiday. People knew it was temporary so it made them feel a sense of urgency to buy a property quickly to “save money “. Only they didn’t really save money in many cases as the extra demand made property prices rise.
Once the scheme ended prices dropped again.

Yes, and that fed into FOMO (like buying too much toilet paper during Covid but much more damaging to your financial well-being) and there was also the WFH mania where people actually believed that the world had changed forever and they would be telling their managers at large banks/ global corporations that they wouldnt be coming into the office ever again LOL, you almost couldnt make up how easily persuaded of absolute nonsense people can be?

I stocked up on loo paper Crashy because you wouldn’t want to be caught short would you?

I always feel the stamp duty holiday is really overstated, a factor sure, especially one that built confidence in the market which helped, but how many people chose to move house purely because of that? Especially as prices went crazy.

I think there was a lot of pent up demand dating back to the referendum, we bought our first house in 2017 and I remember how anxious we were buying not knowing the impact of Brexit, it was slim pickings on the market. We sold in 2020 and our house increased about 3% in 3 years (appreciate this is location dependent). So you get to 2020, everyone is trapped in their houses that suddenly feel small, people are looking for working space, bigger gardens, realising life turns on a dime, and start looking. Then you throw in the stamp duty holiday, seeing lots of other people looking to move producing confidence in the market, more comes on the market and voila.

That's my interpretation, pretty much what happened to us anyway. We re-prioritised during Covid, and chose to move (before the stamp duty announcement).

What puzzles me is - Who bought all the small houses/flats in the city so people could move to the country?

@CrashyTime good point, I gather demand for flats decreased, London flats didn't see the same increase in price. We sold to first time buyers (ours was a small house not a flat).

I`m not actually convinced that the "rush to the country" happened on the scale the media were portraying either, my feeling is that a lot of it was hyped by country estate agents trying to flog rural houses.

In the long term, house prices always increase in value.

Not if interest rates go back to normal levels and stay there, the increase in prices due to cheap lending isn`t the same as increases due to general inflation, house prices have a long way to drop if rates stay at historically normal levels.

Bounceback loan money needed somewhere to go.