Despite the many, many downsides of the coronavirus pandemic, it has been a golden time for anyone looking to sell their home for a tidy profit.
The government’s stamp duty holiday has created a queue of buyers looking to snap up a new property, and that demand has forced up prices – many are now selling at an all-time high.
And, according to the findings from Nationwide, the price surge in August was the largest monthly rise in average property price in more than 16 years – an approximate increase of 2%. Their spokesperson said the housing market’s recovery after the Covid-19 uncertainty was ‘unexpectedly rapid’.
It has also been noted that the number of sales being completed has increased partly due to those held over from the lockdown in March.
When Will Property Prices Fall?
How long the property boom will continue for remains to be seen, with may analysis suggesting that when the government’s various support schemes, most notably furlough, fully wind down then the impact upon the jobs market could be disastrous – that will then alter the supply/demand curve exponentially, with prices set to fall.
Even the government’s own agency, the Office for Budget Responsibility, has predicted that property prices will decrease in 2021, and the economic impacts of the bubble bursting could be stark.
It has also been noted that any buyers’ decisions for moving have been influenced by ‘lockdown life’, i.e. they now want to have a bigger garden or outdoor space, or they need an extra bedroom to act as an office for remote working. It is expected that the ‘honeymoon period’ will fade in time as we get back into the workplace on a full time basis.
When Does the Stamp Duty Holiday End?
Stamp duty is the bane of a property buyers’ life – a tax that most see as a major annoyance and unnecessary thousands spent.
By issuing a stamp duty holiday back in July, the chancellor Rishi Sunak knew he would stimulate demand for property and thus the economy, and as we’ve seen from the stats already his wish has been granted.
At the time of writing, 90% of property buyers can buy a new home without the cost of stamp duty – the threshold has been increased to homes worth £500,000.
But prospective buyers are being warned to move fast, as the stamp duty holiday will end on March 31 – and it’s unlikely to be extended thereafter.
Is Now a Good Time to Buy or Sell a New Home?
Right now we are undoubtedly in the midst of the ultimate seller’s market, with prices reaching astronomic highs. If you are in a position where you can sell now and then rent/live with friends or family for the next six months, you will be in an extraordinary position when the UK property market inevitably crashes in 2021.
There are other benefits of selling now as well. The average time it takes for a property to sell has gone from 39 days down to 27, according to Zoopla, with buyers desperate to take advantage of the stamp duty holiday.
Henry Pryor, a property expert, told the Daily Mail: “My advice would be if you want to sell, get on, make the most of the post-lockdown bounce and find a buyer — even if this means having to rent before you buy somewhere else or delaying the completion date so you have time to look.”
As for buyers, clearly there are savings to be made in terms of stamp duty, but those have to be weighed against the increased mortgage you will need to take out given that the price of the property you are buying has all but certainly increased in the past six months.
Location will be key as well. According to the latest figures, properties in Devon, Cornwall and other coastal areas have seen the most dramatic increase, with many homeowners looking to swap the city for the countryside.
First Time Buyers Warned of Credit Crunch
The downside of the current economic situation is that lenders are tightening their belts as they seek to avoid being lumbered with bad debt, and that will hit first-time buyers with a low deposit to their name particularly hard.
Banks are expected to be much stricter in their criteria for those accepted for a mortgage, particularly with the risk of redundancies in an unstable jobs market. Many lenders have refused applications from those on furlough or with no concrete return to work date too.
The message is clear: save for a larger-than-normal deposit, or face heartbreak when attempting to purchase your first home.