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property market buoyant but how long can it last?

The good news just keeps on coming as far as the housing market is concerned – well, for homeowners at least, not so much first-time buyers and second steppers trying to move up the ladder.

The latest data from the Office for National Statistics and the Land Registry reveals overwhelming evidence that consumers are still willing to spend money on property. UK house prices increased by 10.2 per cent in the year to March, up from 9.2 per cent in February, as demand continued to outstrip supply. Average house prices increased by 1.8 per cent between February and March, compared with an increase of 0.9 per cent during the same period a year earlier (admittedly, just before the housing market shut its doors thank to the pandemic).

Of course, the national average price conceals some significant regional differences, with house price growth the strongest in Yorkshire and The Humber where prices increased by 14 per cent in the year to March. Buyers are more willing to consider remoter locations than they were before the pandemic, thanks to the desire for more space and increased ability to work from home. Meanwhile, London may have the highest property values in the country but price growth is not so stellar, with prices rising by 3.7 per cent in the year to March. However, while the capital had the lowest annual growth of anywhere in the country, it still remains beyond the realms of many buyers, unless they have significant financial assistance from the Bank of Mum and Dad.

What is encouraging about these figures is that they suggest that buyers have enough security around their jobs, as well as faith in the wider economy, to give them the confidence to buy property. Buying a home is one of the biggest transactional purchases you are ever likely to make, and is not one sensible people enter into lightly. This confidence in the market, on the back of a worldwide pandemic, is hugely positive. As we recover from the economic impact of Covid, we need consumers to spend money, whether on property, in shops or restaurants, and pubs.

Struggling first-timers

With property prices continuing their inexorable rise, one downside is that those trying to get on the housing ladder are going to struggle all the more. One wonders whether the Bank of Mum and Dad has taken a dent through Covid and whether there will be less money available to help fund deposits. Since the government mortgage guarantee scheme was announced in the Budget, the number of 95% mortgages has increased significantly. While this has meant rates have started to fall, they are still rather higher than products aimed at those with larger deposits. High loan-to-value deals also come with a number of restrictions so they won’t be suitable for everyone.

The importance of first-time buyers group should not be underestimated; we need the next generation of homeowners to want to buy and be able to do so. The government has a responsibility to make property more affordable, in some way, shape, or form.

Prices up but transactions down

While property prices continue to rise, although it is not a uniform picture across the country, the transactional picture is rather different. HM Revenue and Customs reports that the number of transactions (117,860) fell significantly by 35.7 per cent in April compared with March. Why such a dip in what is otherwise by all accounts a booming market? It is likely that a large number of purchases completed in March in anticipation of the stamp duty holiday expiring at the end of the month, as buyers desperately tried to save up to £15,000 on their purchase. This proves how significant an impact the stamp duty holiday is having on buyer appetite and confidence. April was always going to be softer in terms of number of transactions, although of course, the holiday has since been extended to the end of June, before tapering until the end of September. There is still time for buyers to make a saving, assuming they can find the property they wish to buy.

While there was a monthly drop in transactions, HMRC also reported a quite stunning annual rebound in transactions with a leap of 179.5 per cent compared with April 2020. Given that a year ago the first lockdown bit into the property market hard, with only essential transactions allowed to continue as viewings came to a halt and surveyors couldn’t access properties to undertake valuations, this comeback is nothing short of astonishing. The continued resilience of the housing market, people’s desire to move somewhere with more space both inside and out, and overall confidence in the economic outlook, really are astonishing.

All in all, the data continues to support a growing argument that stamp duty should be abolished completely so as to continue to encourage transactions, upward mobility, and to support the economy. We call on the government to continue the good work they have already done with the stamp duty holiday, furlough, various support schemes and the mortgage guarantee scheme, and go that one step further.

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