Coming out of the Coronavirus crisis is proving to be a difficult process, and setbacks and local lockdowns are likely to get in the way of economic recovery.
But one area that is proving surprisingly resilient is the property market. At Continuum, we are looking at why – and what it may mean for your home purchase plans.
What is happening in the market?
Many experts had predicted a downturn, and house price falls as people worried about job security in the wake of the 3-month shutdown. These worries are justified. Many major employers, especially on the high street are letting staff go.
But despite the fears, UK house prices bounced back in July after tumbling in June.
Building society Nationwide said British house prices jumped 1.7% in July compared to a month earlier, when they fell 1.6%.
In the UK year on year, house prices returned to solid growth of 1.5% in July. The average non-seasonally adjusted price was £220,936 this month.
What is going on?
There are three factors in play.
The first is pent-up demand. Buyers were frustrated when the entire housing market was put on ice at the end of March and for the whole of April. People who needed to be closer to a new job or more space to cope with a growing family were becoming desperate.
But the second reason is even more powerful.
As part of his package of measures to kick-start the economy, Chancellor Rishi Sunak announced a stamp duty holiday in his summer statement early in July. It instantly raised the threshold at which people pay the stamp duty property tax to £500,000 from £125,000.
Data from property website Zoopla this week showed that the stamp duty holiday has significantly boosted London’s housing market. New sales rocketed by over a quarter in just two weeks.
This is dramatic and compares to a 6% rise across the rest of the country. Zoopla has said that this was because London’s higher house prices meant first time buyers stood to benefit relatively more from an increase in the tax threshold.
It certainly looks as though the Chancellors initiative is paying off, particularly in the capital. However, it is not the whole story. London house prices rose 1.7 % in June – before the stamp duty cut came in – compared to a year earlier.
Remember, there is a third factor supporting the resurgence in the housing market. Low interest rates mean that if you act now you can secure a bargain on your mortgage.
But although rising house prices are undeniable, they are not the only figures that are important. The market has still taken a big hit this year.
According to Zoopla, housing sales in 2020 so far are around 20% below the same period in 2019. Estate agents have been faced with around £27bn in lost deals – and many people who might be expected to make a move are still staying put.
What happens next?
The bounce back in prices reflects the unexpectedly rapid recovery in the housing market activity since the easing of lockdown – considering the country is going through its worst economic slowdown in recent history.
But it may be too early to think we are back to business as usual. Economists and estate agents agree that pent-up demand is outstripping a currently restricted supply, keeping prices buoyant. However, they warn that a wave of unemployment in the winter – as furlough comes to an end and if a second wave hits – could still lead to prices falling.
So, should you get on the property ladder now?
Not only is it possible to buy and sell homes again, it is possible to make some major savings, thanks to the stamp duty holiday. If you are ready to get on the property ladder, or ready to take a step up, now could be a good time to do it.
Don’t forget, the stamp duty holiday is only temporary, and we will be back to paying the government when we move after next March.
There may not be big falls and bargains to be snapped up – but If you believe you have found a property you want, there could be every reason to buy it.
The one thing to be certain of is that you get the most appropriate mortgage deal for your needs. At Continuum, our experts can search the entire market, and take advantage of deals that are not generally advertised.
Call us now for the help you need.
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 product, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
The Financial Conduct Authority does not regulate taxation advice.
Property valuation is a matter of judgement by an independent Valuer therefore it is generally a matter of opinion rather than fact.
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