How long will the property boom last?

Buyers hoping for a repeat of the 2008/09 slump in residential property prices, amid economic uncertainty caused by the Covid-19 crisis and Brexit, have so far been left disappointed.

The latest Land Registry House Price Data shows that home prices increased again in August to reach an average of £251,439, which is an increase of more than £8,900 since the start of Lockdown.

“If one was not aware of the pandemic one might ask what has been stimulating the UK housing market,” said Anthony Codling, CEO, Twindig. “House prices were up more than £5,000 before the announcement of the stamp duty holiday, which begs the question – was it needed?”

While there are several elements fuelling growth in demand for property, there can be no doubting the fact that the existing stamp duty holiday has been a primary driver, along with a general desire for more space.

Craig McKinlay, new business director at Kensington Mortgages, commented: “Compared to house prices crashing by over 15% in early 2009, it is still pretty remarkable how well the market is faring thanks to pent up demand and a stamp duty break.

“The market is more robust now than what can be said for the wider economy, and this is only likely to continue for the rest of the year for those who can make their next move on the property ladder.”

Iain McKenzie, CEO of The Guild of Property Professionals, concurred: “There are a few elements that are fuelling buyer demand at the moment, one being the stamp duty holiday, with many moving up their decision to purchase a property to make the deadline at the end of March next year.

“A change in a lot of people’s lifestyle and work situation is also impacting demand with people wanting larger homes with more space, be it an extra room they can use as an office or a garden.”

But while buyers look to property as a relatively safe investment for their money, there are also growing concerns about the state of the economy with the UK experiencing its first recession in 11 years, and so is the housing market’s post-lockdown bounce about to run out of steam?

McKenzie added: “Properties are selling faster than they did a year ago, however, the latest mortgage approvals suggest the market is returning to more ‘normal’ levels and the forced pause in the housing market means 2020 sales levels will no doubt end below those of 2019.”

But he points out that UK house price growth is still at its highest level in over two years and revised forecasts anticipate property prices will end the year 2% higher, which is “a significant reversal to the negative expectations anticipated as the market reopened”.

Nicky Stevenson, Fine & Country, also believes that the housing market is looking at a “strong autumn”, but beyond that?

Stevenson commented: “The question is how long this surge can last, with speculation already swirling that the market is set for a fall. Such predictions are probably premature.

“Though strong growth like this will be temporary and we will soon be entering the traditionally quieter winter period, there are reasons to suspect that this is no ordinary autumn.

“Consumer confidence among large swathes of the population is still very high. We already know that during lockdown a record 29% of disposable income was tucked away and saved as people were unable to get out and enjoy themselves. Rightmove also reported a 70% annual jump in the number of sales agreed during September and it says that, for the first time on record, agents have more properties marked as sold than available for sale.

“This is incredible. These aren’t metrics usually associated with a stalling market, though the rate of growth will inevitably slow before picking up again in the New Year.”

While most home movers are doing well, the same cannot necessarily be said for first-time buyers, owed largely to the sharp decline in the availability of high loan-to-value mortgage products.

“There’s been some talk lately of what effect the removal of many high LTV mortgages is having on the first-time buyer market which is as much a leading indicator as the all-important London market,” said independent estate agents James Pendleton.

But the London-based agent reports that the drop in high LTV mortgage product is “having very little effect” on the housing market locally.

He commented: “Demand for cheaper properties hasn’t weakened and that’s because the bank of mum and dad is still widely open for business, interest rates remain low and high rents mean it’s still well worth getting on the property ladder.

“As long as mortgage repayments remain cheaper than the cost of rent, demand to buy a first home will continue to show strength, and first-time buyers everywhere are still able to turn to the Help to Buy scheme if they need to.

“We are about to hit a period when the market traditionally slows down. When the clocks change, people switch into hibernation mode and new enquiries begin to soften until the New Year. How much the stamp duty holiday will affect that this year remains to be seen, but this incentive plays a relatively muted role in the capital where prices are highest.”

According to the OECD, the UK risks lasting economic damage from Covid and Brexit, with spending cuts and productivity boosts required to help the economy recover from the pandemic and Britain’s decision to leave the EU, but that does not necessary mean property prices will plummet.

Much will depend on the chancellor and what fresh initiatives, if any, he comes up with to prop up the property market, and help prevent a collapse in prices – not just to protect homeowners, but the banks too.

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6 Comments

  1. #ImpressiveConveyancing

    Lots of house price ‘news’ story distractions, when the only news is how busy everything is….for the moment.
    Pent up demand is subsiding now, stamp duty panickers are almost through purchasing now, and we have the usual autumn slowdown anyway.
    January to 1 April will be huge again, but the Government will then bow to pressure and will some how extend the stamp duty holiday to protract how busy it is. But only for a few months…..unless they place the burden on the sellers, which they may do.

    But yes, around July next year, there will be a steep drop oil volume, not a time to be one of many new recruits, as you will be for the chop.
    As a result the volumes coming through recently and to July 2021 conveyancers remain so incredibly busy, risking negligence everywhere they touch, but doing a sterling job, while all around them – Councils, mortgage lenders and factory conveyancers  (and non factory who have just taken on too much_- causing them delays and extra burden in just managing to cope

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  2. Property Poke In The Eye

    Pent up demand is dropping off!!  Tough times are coming for all businesses – plan and prepare now if you already haven’t.

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  3. Cyberpunk35

    Winter is coming. Prepare for the worst. Demand has already dropped off with many agents reporting their third week of subdued activity levels. No one wants to be a party pooper but we need to face up to the fact that pent up demand, divorces and babies that came out of lock down is now old news.

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  4. TPCTom

    Lots of good news stories around price, how the last few months have been etc but I – like a large number of commenters here – have seen a drastic decline in the number of new properties coming to the market in the last few weeks. Yes pipelines are looking great but we’re all going to need that winter fat to tide us over!

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  5. TwentyCi

    Our data also supports this. The key findings are that:
    The average asking price across the UK has risen £31,000 year-on-year, now standing at £384,000
    · The only area to have experienced a fall in asking price is inner London recording a decrease of five per cent
    · Wales has experienced the highest price change at +12 per cent
    · The South West has seen the highest rise in sales agreed at +38 per cent
    · Three and four bed houses have experienced the largest increase in sales agreed at 24 per cent and 43 per cent respectively
    · Sales agreed have risen by 47 per cent in rural areas compared to just 19 per cent in Urban Areas
    · Sales agreed on detached properties are up 48 per cent
    · There has been a 76 per cent increase in the number of people saying they want to move since Q4 2019
    What this shows is that the Pandemic has had a significant impact on the way people now want to live. Unsurprisingly we are seeing demand grow for bigger properties, most likely to facilitate working from home and also a move towards rural areas where houses tend to have access to more outside space. 
    Colin Bradshaw, TwentyCi

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  6. Alan Murray

    There are definite small signs of a slowdown starting. With furlough about to end those signs will no doubt increase.

    But I think it is pretty certain the SDLT holiday will be extended. By next March the rest of the economy is likely to be in freefall and being propped up only by the property market. The benefits to the wider economy – retail, services etc, will be far greater than the lost stamp duty which in the wider scheme of things is a drop in the ocean compared with spending caused by COVID. It is just a case of when the Government choose to announce when the extension will take place. It would be sensible for it to be in the next few weeks, since anyone wanting to cash in on the holiday will no doubt be reading the media reports about huge delays.

    So that probably means there will be an announcement on 24 March.

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