With a new spike in cases and a new lockdown, the Coronavirus crisis is providing more problems to the economy – and our own personal finances.
But the property market is currently defying all predictions. At Continuum, we are looking at why, whether the gains can be maintained, and if we are due for a house price correction.
What is driving the boom?
Despite the fears of a collapse in prices the UK housing market bounced back in July after tumbling in June and has gone on to new heights.
Building society Nationwide said British house prices rose 5.8% in October, the highest rate since Jan 2015. The average non-seasonally adjusted price was £ 227,826 this month.
The bounce back in prices since the easing of lockdown has come despite the country going through its worst economic slowdown in recent history.
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What is going on?
This growth is surprising at a time when people are worried about the economy and their jobs, but there may be some clear reasons for it. Pent up demand was one factor. Another was Chancellor Rishi Sunak’s stamp duty holiday, raising the threshold for stamp duty property tax to £500,000 from £125,000 (set to end in March 2021). Yet another was the low Bank of England Base rate – and the low rate mortgage deals that it allowed.
But although rising house prices are dramatic, the actual volume of people who are moving may be reduced. According to Zoopla, housing sales in 2020 so far are around 20% below the same period in 2019.
What happens next?
There is a boom, but there is also a possibility that it will be followed by a bust, and it may be too early to think we are back to house price inflation as usual. Any wave of unemployment in the winter as the second lockdown hits could still lead to prices falling.
Historically, rises in unemployment mean falls in house prices. In 1993, when unemployment in Britain rose to about 10.5%, house prices fell by 20%. The 2008 financial crisis saw another 20% dip.
Economic think tanks, including the CEBR (Centre for Economic and Business Research) have stood firm by their forecast of a significant house price fall in 2021. The CEBR were predicting a reduction of as much as 14% at the start of the crisis. They have since revised that figure to 10%, a figure that is still worrying.
Estate agents, on the other hand, who have seen an unprecedented rise in enquiries and house sales are more likely to suggest that any forecast of a property market crash is nothing but scaremongering, unsupported by any evidence.
What should you do?
As Covid itself has proved, it is impossible to predict the future. A vaccine and an early recovery could see the global economy and the housing market pick up.
An end to the furlough scheme, free overdrafts and mortgage holidays could mean falls.
If you are considering a move, however, there is still time to take advantage of the stamp duty holiday, and the historically low interest rates that make mortgages especially good value.
There may or may not be big falls to come 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.
Call us
To arrange a personal appointment with a Continuum expert to discuss mortgage and remortgage deals via video, call us now.
The one thing to be certain of is that you should aim to get the very best mortgage deal for your needs. At Continuum, our experts can search the entire market, and take advantage of deals that are not generally advertised. It means paying less for your home.
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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 a suitable mortgage product, you should seek independent financial advice before embarking on any course of action.
