What next for the property market?

UK house prices are still soaring. Official figures show they have been increasing at their fastest rate for more than a decade.

Despite the rises, they are finding plenty of eager buyers. Mortgage lending showed the biggest net increase on record in March, rising by £11.8 billion, the biggest increase since the series began in April 1993, the Bank of England has said. Buyers have queued overnight outside estate agents’ doors and putting in offers for properties they have not even viewed.

British lenders approved 82,735 mortgages in March, down by about 5,000 from February and a recent peak of over 103,000 in November, Bank of England data shows.

At Continuum we are looking at the reasons why – and whether the housing market can really continue to grow.

Is the market changing?

House prices in the UK have generally been going up since the financial crisis. The UK’s biggest building society, the Nationwide, has described the UK housing market as “buoyant”, and Property values were 10.2% higher than a year earlier – the fastest annual rate of growth for 14 years.

The rush to take advantage of Chancellor Sunak’s Stamp Duty Land Tax holiday and the extension announced on March 3 was an important factor in the frantic activity driving the market.

The first £500,000 of any property purchase in England or Northern Ireland will remain exempt from stamp duty until the end of June, and there will be a £250,000 tax-free allowance until the end of September.

The stamp duty holiday, plus brightening economic sentiment combined with low mortgage rates alongside limited stock availability is a combination likely to drive market activity and house prices well into the summer months.

But looking closely at the figures and breaking them down by property type and area suggests that something very new may be happening.

Unlike recent booms, the biggest price rises have been outside London and the South East of England. Instead of traditional property hotspots, London and the commuter towns that serve it, the increases have been clustered around the central areas of the UK and Wales. There is also a notable boom area in Cornwall which, according to property sales search site Rightmove, overtook London as the most popular search destination for property buyers.

It seems that people really are deserting the big city for the countryside.

A big house in the country – or big problems?

The big change seems to have been triggered by lockdown, which forced the general adoption of working from home.

Many buyers now want space rather than proximity to commuter routes, according to Nationwide. They want bigger homes with more room to live and work, as well as a garden, and easy-to-reach coast or countryside.

Of course, this is an oversimplification. The prices of flats may be static, or rising at a slower rate than houses – and there is some suggestion that younger buyers are taking the chance to make a move into lively cities as Covid restrictions ease.

The question is what happens next?

Some commentators believe that the end of the stamp duty holiday will put an end to the pace of house price growth.

Others suggest that the pace may slow, but the increase will continue.

Predicting the future is impossible, but there are certainly positive signs from the economy in general. This could support the housing market, as people may have fewer concerns about their jobs than they have in recent months.

It is not without risks. If the economy grows too quickly and inflation takes hold, the government might need to look at throttling economic activity back. The Bank of England could conceivably start increasing the bank rate – which might mean many people could find that they have over-extended themselves and bring the booming market to an abrupt halt.

Contact us

We search the entire mortgage market to find a solution to your needs. Contact us to arrange an appointment with a Continuum mortgage expert.

But if you are considering a move now, the growing cost of homes may make it wise to make it sooner rather than later. Getting the right mortgage will be vital – especially if there are problems ahead. At Continuum we can search the entire market to find the mortgage product that is right for you.

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. 

Record jump for UK mortgage lending after tax break extended | Reuters

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