The challenges of 2020 have shone a spotlight on the nation’s home life in a way that few could have predicted and a seemingly resilient factor in the ongoing fear and uncertainty wrought by the Covid-19 pandemic has been the value and security of a place to call home.
Willingly or not, the UK population has been spending much more time at home, with the opportunity to see just how their property works – or doesn’t – for their lifestyle. This has led to some notable changes in the housing market this year.
Despite a slower than usual housing market in the first quarter of 2020 as the pandemic took hold – and then an industry wide shut down between the March-May lockdown period – some experts are pointing towards a nationwide surge in sales and new properties coming onto the market as an encouraging sign of an industry not just finding its feet again but really on the way up.
But is this a short-term recovery period or are we really in a housing ‘boom’? What are the key trends that we are seeing in the property market in 2020 and what do they tell us?
Relocation Away from Cities and Urban Areas
Largely driven by concern about Covid-19, more bang (and green space) for your buck and a sudden need for many to work from home, there has been a significant rise in buyers seeking property outside of cities and urban areas.
Around 50% of the UK workforce were working from home in April 2020 at the height of the lockdown period and with many of us in no rush to return to the traditional 9 to 5 office setting and busy commute the necessity and desirability of city living has waned and ‘the Good Life’ seemingly reigns supreme.
A Surge in Sales During the Traditionally Quiet Summer Months
The summer holiday months of July and August are traditionally a quieter period for house sales before the market picks up again in autumn. Not so in 2020, which has seen a sudden surge in sales in the Capital in particular.
Whilst this is an optimistic sign that the industry is recovering from the Covid-19 fall out, the increase in property sales and homes coming onto the market can also be attributed in part to the backlog of properties which would have been marketed for sale earlier in the year had the pandemic and the negative impact of Brexit (remember that?!) not hit during a traditionally busy time for the property industry in the first quarter of 2020.
Overall Increase in Both Sales and House Prices
Current figures suggest an overall increase in both sales and house prices across the country. On average, August saw a two per cent rise in house prices in the UK. This, according to data provided by the Nationwide Building Society, has created a new record average price of £224,123. On this alone, it could be argued that we are witnessing a property boom. Although interesting, London has bucked the trend with no overall increase in property prices across July and August.
Some industry insiders are crediting the nationwide increase in sales and house prices to Chancellor Rishi Sunak’s stamp duty relief policy – but is this the case?
As concerns about the effects of Covid-19 on the economy grew in July, Chancellor Rishi Sunak announced a stamp duty holiday. The property threshold was raised to £500,000 for residential properties purchased from 8 July 2020 to 31 March 2021 inclusive.
On 10 September 2020, the Financial Times warned that the UK’s housing boom was only a boom for some, mainly wealthy buyers, and that borrowing was becoming more difficult for others, drawing parallels with the post-crash environment of 2010-2012. Certainly, there is no shortage of interest in higher priced properties, but then that isn’t unusual.
Other sources point to the fact that first time buyers are a mainstay of the London property market, with sales up a remarkable 44 per cent in July. Clearly these sales cannot all be attributed to the relief in stamp duty, since first time buyers were always subject to a tax break from stamp duty and those spending under £125,000 exempt entirely.
Experts all agree that stamp duty relief has certainly benefitted anyone who was partway through their purchase or already considering a move and there has definitely been a shift towards upsizing by families with earners who can now work from home. Whilst the temporary stamp duty relief will clearly benefit many of these buyers, it will not be the only factor for those making the move. Indeed there is an awareness in the short term of a potential return to lockdown or similar restrictions and long-term changes in work-life balance are also high on the list of driving forces.
Is This a Sea Change or Passing Phase?
As uncertainty about the long-term effects of Covid-19 look set to continue for some time to come and with no concrete timelines for a vaccine in sight, are we seeing a property boom and do aspects of these increases in sales and house prices reflect long-term, deep-seated changes in the market?
For some, the answer to the latter is a definite “yes”. However, whilst we can be cautiously optimistic about the housing market in the short term, the resultant impact on the economy from the end of the stamp duty relief period in March 2021, the end of the furlough scheme in October 2020 and any future periods of lockdown means only time will tell.