Property values bounce back in response to demand
With many estate agents reporting a record number of enquiries in June and July, It is not surprising that house prices have bounced back significantly as lockdown continues to ease. Nationwide Building Society reported a 1.7 per cent increase in prices in July compared with a 1.5 per cent drop in June, while Halifax recorded a 1.6 per cent jump after months of decline and stagnation. Both lenders put this significant turnaround down to pent-up demand from when people put decisions to move on hold during the Brexit saga, combined with a desire for more indoor and/or outdoor space which emerged during lockdown.
The housing market is busy and productive, with many agents reporting that they have never been busier. This is great news for the property market as a whole which has been static for so much of the year as lockdown brought everything to a grinding halt. The housing market is a vital driver of the UK economy as a whole and should be supported by the government as the foundation upon which it can keep the UK working.
Stamp duty relief
It’s no coincidence that this uptick has come at the same time as Chancellor’s introduction of a stamp duty holiday on purchases up to £500,000, saving buyers up to £15,000. The stamp duty adjustment has made a huge difference for buyers, with the saving going towards the purchase price and any refurbishment that needs doing.
Brexit and Covid-19 aside, stamp duty has been the biggest negative influence on the housing market in recent times since the government introduced higher rates on more expensive properties back in 2014. While we welcome Rishi Sunak’s decision to introduce a payment holiday on the lower end of the market, and not to restrict it to first-time buyers but include investors and home movers as well, more still needs to be done. The government not only has to look to extending the existing holiday and ideally making it permanent, while also looking at some reform for the higher end of the market. Otherwise, we fear that whatever bounce we have seen in the past few months will only be temporary.
With the government introducing a further 2 per cent stamp duty surcharge for non-UK buyers from April 2021, someone from overseas buying a second home in the UK for more than £1.5m will pay an eye-watering 17 per cent in stamp duty. This would surely be enough to deter all but the very committed of buyers. While few will have sympathy for non-UK purchasers, the issue is that in raising stamp duty further still it deters investment in the UK at a time when we need to be seen to be open for business.
The lending environment
With demand from purchasers high, we need lenders to consider more imaginative and flexible ways of providing mortgages going forward. In particular, there needs to be assistance for buyers who may have been affected by the furlough schemes and a drop in their business.
The MT Finance team is ready to discuss your property finance requirements; please don’t hesitate to contact us on 0203 051 2331 or leave your details on our contact form, and someone will be in touch shortly.