As we begin to approach the end of a tumultuous 2020, there is plenty to look back on when it comes to this year’s property market. The ongoing COVID-19 pandemic has driven plenty of changes across all sectors and the UK housing market is no exception. National and local lockdowns are continuing to induce many lifestyle adjustments and this has certainly had an impact on the performance of the current property sector in the country.
Stamp Duty Holiday: What Does It Mean For The Property Market?
The housing market has certainly demonstrated some strength this year, and the stamp duty relief is undoubtedly part of the driving force behind this. The Government announced a nine-month stamp duty holiday in July, with the threshold in England being raised to £500,000.
This creates average savings of £4,500, providing promising opportunities for both first-time buyers and established buyers. Payable tax on homes of £500,000 or more has also been slashed by £15,000.
As a result of this determination to reignite the UK property market, there has actually been a nationwide increase in the number of people buying a property. In fact, since July, there has been an increase in the number of buyers in every region in the UK, with London and the South East of England having particularly large increases. This is likely to be down to commuters willing to travel longer distances to work in return for large private gardens and more space to work from home. The number of first-time buyers is more than 40% higher year-on-year.
Higher Deposits For First-time Buyers
The stamp duty holiday is mainly having a positive impact on the housing market. However, something to bear in mind if you are looking to buy a house is the amount that some lenders are willing to lend.
Before the pandemic, most first-time buyers could secure a 90%-95% mortgage, but many lenders are now reducing these figures to 85%. As a result, house buyers are needing to find a 15% deposit, which actually can equate to much more than the savings they would be making on stamp duty relief. With this in mind, it’s important now more than ever to take your time when looking for a mortgage lender.
House Prices Continuing To Surge
Although we are now officially in a recession, house prices are continuing to rise and in fact have hit a new record high, rising at the fastest rate in four years. Believed to be a knock-on effect of the stamp duty changes, house buying activity has spiked, leading to a boom in house prices in the UK.
This month, the average asking price for a house is £324,000, up 5.5% from a year ago. However, it’s not just first-time buyers who are contributing to this surge. In fact, existing home-owners are more likely to be the reasoning behind this as they are able to invest in larger homes, with the help of the equity from their existing properties and of course the stamp duty holiday.
2021 Property Market Predictions
It’s safe to say that so far, the UK property market is booming. However, unfortunately, that’s not related to the current economic situation. The UK officially entered a recession in August 2020, which means there has not been enough time for the full effects of this to manifest themselves. The current stamp duty holiday will end in five months’ time, and it’s this that is currently propping up the surge in house sales and prices.
With a looming rise in unemployment as a result of the pandemic, paired with first-time buyers finding it increasingly difficult to source low-deposit mortgages, a downfall in the UK property market next year does seem inevitable.
It will come as no surprise to us next year when this year’s economic climate begins to take its toll on the property sector. The factors mentioned above will contribute towards a slowing down of the 2021’s housing market and although the pandemic will not completely alter the rules of the cycle, they will certainly influence the direction it takes over the next 12 months at least. For now, providing the buyer demand continues to outrun supply, house prices will remain strong.
Open House Leicester
Are you looking to let or buy property in Leicester? Open House Leicester can help you take advantage of the currently thriving property market. From free house valuations through to property consultancy services, we can help. As leading letting agents in Leicester, we’ll be sure to utilise our knowledge and years of experience to support you. Get in touch with us today to find out how we can help.