Has the Property Market been hitting its peak?

The latest UK price index released in January this year says house prices rose 7.6% in the year to November 2020, up from 5.9% in October. On a non-seasonal basis, average house prices in the UK rose by 1.2% between October and November, which is important given that house prices fell by 0.4% in the same period a year earlier.

Based on this, it appears that the slight upturn in the real estate market, due to the pandemic and lockouts, was still alive and well as we approach the end of 2020. Although many predicting that house prices will fall last year has never been but instead there is a demand from people reassessing the way they want to live, just pushing them away. The record high prices of last year were a reflection of the strength of the real estate market, as well as the fortunes of people moving despite challenging conditions.

Another sign that the boom is not over is just the introduction of low investment mortgages. In early September 2020, low investment mortgages were scarce with only 44 yields available, this has risen to almost 200 yields according to data from Moneyfacts. This is a big change and is likely to stimulate a first time consumer market, again allowing first time buyers to realize their home ownership dreams.

The news of the Stamp Duty Land Tax (SDLT) holiday was another catalyst that fueled a market that was already reducing seasonal movements. Many people increased their move plans to make the date and benefit from the tax relief. According to Zoopla, in the last quarter of 2020 there were more than 140,000 more people buying a property than in the previous year, with an estimated 418,000 home sales going to completion.

While enthusiastic buyers are crossing their fingers and hoping to sell their property across the line before the gate closes, the very high number of transactions has been delayed. Current supply chain processes are under severe pressure with real estate sales reported to have increased from a typical 12 to 20 weeks to completion. Experts fear that as the construction industry fails to process the transactions quickly enough, those still in view at the end of January are unlikely to make the cut – off at the end of March. In fact, if the date is not extended, only a quarter of what was sold in January will benefit from the stimulus. With the current volume of business moving through the process, tens of thousands of people will miss the deadline and need to find extra money to cover the fee due. to pay. The date for being too close to comfort has already impacted confidence with the market taking several strokes recently.

According to a recent survey by the Association of Property Professionals, about a third (31%) of people currently buying a property said they would cancel their proposed move if they needed a tax. pay a stamp, with another 43% admitting they might do the same. If buyers do as they say and withdraw from their property purchases, we would see a large number of property transactions fall through at the beginning of April, if not earlier. However, that said, it remains to be seen whether buyers will reverse their purchase if they cannot claim the relief. A broad re-arrangement up and down chains would seem to be the more reasonable outcome, since it is much easier to say, that you walk away from it, than to do it. With the end of January just around the corner, we will not have to wait long to find out if buyers will keep their word.

For now, the real estate market remains strong, bolstered by stamp duty holidays and post-Brexit investor confidence, however, challenges lie ahead. The real test of the stability of the real estate market will be at the end of the stamp duty holiday and, of course, the furlough scheme, which is likely to lead to a rapid rise in the unemployment rate if businesses cannot recover from the financial damage caused. with the pandemic. If this happens, there is no doubt that the real estate market will slow and the rapid growth in housing prices will stop.

The health of the real estate market and house prices in 2021 will be largely determined by the spread of the pandemic, which will affect the success of the vaccination program or the government extending support to the economy through fiscal stimulus is money. According to reports, Chancellor of the Exchequer Rishi Sunak is currently planning plans to expand support for UK operations in the coming months. The details and format of the measures will be included in the March 3 budget and will depend on how the pandemic spreads to that point. Until then, we wait anxiously.