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prices soften as end of stamp duty holiday approaches

The approaching end of the stamp duty holiday is having an inevitable impact on the housing market, with property prices starting to soften in January as the market runs out of steam.

Lenders Nationwide and Halifax both reported a 0.3 per cent drop in prices month-on-month as buyers started to realise that they would be hard pushed to complete before the end of the stamp duty holiday next month. Indeed, the uptick in applications for bridging finance, as borrowers attempt to find a quick, short-term solution to the problem, is testament to this.

A flurry of demand

While homeowners, if not first-time buyers, like to see property prices continue to rise, it is natural to see them softening now. Since the back end of the first lockdown there has been a flurry of demand from people to transact and take advantage of the stamp duty holiday, and this couldn’t continue indefinitely. People decided they wanted more space and needed to move – and many did. That huge demand and desire outstripped everything else, with a return to gazumping in some hotspots as buyers competed for limited stock and pushed prices even higher.

A £13,000 increase in the average house price over the year, as reported by Halifax, is phenomenal given what we have gone through and are still going through. Prices may have fallen month-on-month but are still 5.4 per cent higher than a year ago. Yet at some point, prices need to stabilise. This started happening in January, following a Christmas break where we forgot about life and work to an extent, before moving into yet another lockdown, which has had an impact on people’s outlook and mentality.

The market is still going relatively strongly, given the circumstances, although some lenders are reporting that activity levels are definitely quieter.

Looking forward

Is there now a natural desire to hold back and wait until when we come out of lockdown before making big decisions such as moving home? Nobody knows when schools, pubs etc will re-open and we will get back to ‘normal’. Life is on hold to an extent, resulting in an inertia until there is more clarity.

How the market reacts to the inevitable slowdown of the economy as the furlough scheme winds down will be interesting considering artificial factors, such as possible stamp duty break extensions, still to come. There is an argument at least for reducing stamp duty for downsizers, thereby increasing stock levels for buyers further down the ladder.

As the rapid vaccination programme continues, the Bank of England reported yesterday that it expects this will help the economy bounce back strongly later this year as confidence returns. This could mean consumers spend the money they have ‘saved’ during lockdown as they catch up on everything they have missed, resulting in a rebound in economic activity. Renewed confidence would also be good for the housing market, and this leaves us broadly positive as to what’s in store for the rest of this year.

How MT Finance can help

MT Finance is here to assist, whether you’re rushing to get a property purchase over the line before the end of the stamp duty holiday or otherwise. Bridging loans can be arranged with funds released within two to three weeks. Please get in touch to find out more on 0203 051 2331 or fill out our contact form and a member of our team will be in touch with you shortly.

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