Covid has had many unexpected economic effects, but some of the most surprising have been on the property market.
Gloom merchants predicted house price falls as a result of Brexit and from the economic fallout of lockdown. In fact, the market boomed up and down the country for much of last year.
But when according to lender Nationwide the upward trend faltered in March, falling 0.2% month-on-month the doomsayers were back, and keen to point to the end of the upward trend.
At Continuum, we are looking at why they are probably wrong.
What actually happened?
Gauging what is really going on in the housing market is actually a challenge. Figures are subject to delay, there are several ways to interpret them, and most of the sources of information don’t cover the entire country. Figures from the Nationwide Building Society do cover the entire UK and seem to be one of the more accurate measures. But the 0.2% month-on-month fall they pointed out in March needs to be compared with a much larger 0.7% rise in February.
What’s more, although prices may have temporarily eased a little, the actual number of homes sold in the UK hit a record in March as buyers and sellers attempted to complete deals before the end of the stamp duty holiday.
About 180,690 transactions were recorded during March according to official figures from HMRC, double the total from the same month in 2020 and the highest number since it started publishing the data in this way in 2005.
But what happens next?
Those keen to buy a new home were keener still on taking take advantage of the Stamp Duty holiday, which can cut the cost of buying a home by tens of thousands of pounds. Any temporary reduction in reported prices may have been triggered by the end of the original stamp duty holiday at the end of the tax year. Those keen to move on may have reduced asking prices to beat the deadline.
Then in the Budget, the Chancellor extended the Stamp Duty holiday by six months until the end of September. This will see a tapering of support, gradually lowering the nil-rate band from June. The extension applies to all transactions in England and Northern Ireland, meaning buy-to-let investors and homebuyers will continue to benefit from tax savings.
The deadline for buyers to take advantage of the higher £500,000 nil-rate band has been extended by three months. This means that buyers in England and Northern Ireland can still save up to £15,000 in tax if they can complete their purchases by 30th June.
It looks as though prices could continue to grow, at least for the next few months. Recent weeks have seen huge demand from buyers and a serious shortage of homes for sale, and it is likely that prices are still heading upwards.
What’s more, powerful though it is, the Stamp Duty holiday is not the only factor driving the market. Record low interest rates mean very low cost mortgages, helping people move up the housing ladder.
There is also a change in market focus. People trapped inside by months of lockdown and looking at a world where working from home is the norm rather than the exception may have reassessed their goals. Extra room for a home office, a bigger garden and an attractive environment may be more important than they once were. The entire market may be buoyant, but larger homes outside the big conurbations may enjoy the most dramatic price growth of all.
Of course, at Continuum we are ready to help you find the mortgage you need whatever happens to the housing market.
We are independent, which means we can look at the offerings of all the mortgage lenders. Not only can we help you identify the hidden costs and see which really are the most appropriate deals for you, we can introduce you to deals that are only available to broker services like ours.
It may mean a better mortgage that costs you less.
Call us to see how much we can save you on your next home.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products, you should seek independent financial advice before embarking on any course of action.
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