What is happening to the housing market?

The growth in house prices since the beginning of the Covid-19 crisis has defied all the doomsayers. Far from collapsing in the wake of an undeniable economic downturn, homes across the country have been offered for – and in many cases sold for – record sums.

But is the house price boom finally running out of steam? The latest figures from the Halifax suggest that they might.

At Continuum we are looking at what the current figures mean – and what they might suggest for the future.

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What has been keeping the housing market buoyant?

There are several factors that seem to have been supporting the market. One of the most fundamental is the low Bank of England Base rate that was brought in to support the economy when Covid-19 and the lockdown threatened to bring businesses to a halt.

The record low base rate of just 0.1% has meant that in many cases mortgages have never been so affordable.

There may be something in the idea that lockdown has meant that many of us are unable to spend as we would in normal times. Money that would have gone on entertainment and holidays is suddenly available to spend on homes.

But the biggest factor of all may be the stamp duty holiday, which means that it is possible to buy a new home without making a sizable tax contribution to the exchequer for the privilege. It means a major saving, particularly for those trading up to larger homes.

So, what is happening now?

The stamp duty holiday is coming to an end, with the current generosity from the Chancellor due to end with the current tax year.

Whether there will be any extension to the scheme is currently unclear. But it seems that just as the thought of not having to pay stamp duty stimulated the market, its imminent reintroduction may be acting to depress it.

The latest average house figures from the Halifax show prices across the UK falling 0.3% in January compared to December, with the typical home now costing £251,968. This is the steepest monthly fall since the spring 2020 lockdown. January’s drop has taken the average home price back to levels last seen in October.

But what happens next?

The figures are clear enough. But it may not be a sign that the market is due to collapse and doomsayers were right after all.

Firstly, it is important to remember that the annual rate of increase remains high – 5.4% overall. It means average prices are still £13,000 higher than a year ago.

Second, although the positive effect of the stamp duty holiday on the housing market is undeniable, it was always known that it was going to come to an end in March.

Given the length of time it takes to arrange conveyancing, with many solicitors now suggesting three months as a likely schedule for completions it seems likely that those buyers who expect to take advantage of the stamp duty reprieve will already have done so.

The effect of the stamp duty holiday is already starting to be priced out of the market, and a small house price correction is only to be expected.

People who might have been considering a step up the property ladder may have taken advantage of the stamp duty holiday and brought their move forwards. This is borne out by a notable decrease in new properties coming to the market, as well as a small fall in asking prices.

A new lockdown, combined with growing concerns for the future, and the looming stamp duty holiday deadline, are now making buyers think twice before committing to a house purchase. The main thing to remember is that the other factors supporting the housing market – low mortgage rates, available cash – and a shortage of desirable homes are still very much in play and should continue to support prices.

If you are thinking about a move, getting the right mortgage will remain the real key to affordability. At Continuum, we can help.

Call us

In challenging times, expert help with your housing plans is vital. Call us to arrange an appointment with a mortgage expert from the Continuum team today.

At Continuum we can search the entire lending market to find the most competitive mortgage products including loans that are not available on the general market. It means that a call to us could help ensure that your home will cost you less – whatever happens to prices in general.

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.

Your home may be repossessed if you do not keep up repayments on your mortgage.



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