As England eases out of lockdown restrictions, the stamp duty holiday also comes to an end with the stepped withdrawal of the offer beginning on 30 June.
House prices increased by around 10% during the pandemic as buyers continued to outnumber sellers; the highest annual rate of growth in seven years. Despite the economy slowing down in almost every other area, all the signs indicate we’re in the midst of a property boom. But will it continue when the stamp duty threshold returns to normal?
When the stamp duty tax break was originally earmarked to end in March, there were a record number of house sales, but mortgage borrowing and property transactions then fell sharply in April, down by more than a third from the previous month. This suggests that a return to normal rates may coincide with a decline in property sales.
However, most experts agree that a combination of other factors will see the market remain buoyant beyond the end of June and into the final quarter of 2021. The government backed 5% deposit scheme, alongside increased household savings and a continuing desire to have more space should see the property market remain strong, and house prices are unlikely to decrease while demand continues to outstrip supply.
Buyers are likely to carry on searching for more flexible space with an expectation that the option to work from home will endure beyond the end of the lockdowns. A survey by the CIPD seems to confirm this with more than 60% of employers saying they were likely to introduce or enhance flexible working going forward. This has motivated an exodus from more expensive city living as people seek a better work/life balance, choosing to swap the daily commute into the office for working from home a few days each week.
Looking ahead, it seems unlikely that the property market’s resilience is likely to lose its momentum in the near future with the mortgage pipeline showing demand continues beyond the end of the stamp duty holiday while prospective buyers wait for the end of lockdown to move or for prices to stabilise.
However, as we emerge from the worst of the pandemic, things may change. Not only does the stamp duty holiday end completely in September, but so too does the job support scheme. With house prices reaching record highs, it is unlikely salaries will be able to keep up, making affordability more of an issue. Coupled with the reopening of the hospitality and travel industries, it is likely that the current housing market activity may start to wane, as many choose to spend their savings on a long-awaited holiday abroad. With fewer buyers, and potentially more properties coming onto the market as the current restrictions are lifted, the imbalance may start to level out and the rate of price rises may slow down.
In essence then, there is no sign of the property market crashing any time soon, which is great news for the post-pandemic economy as house buyers are big spenders. They employ solicitors, builders, and surveyors, and buy furniture, appliances and home improvement materials. Keeping people moving seems to be in everyone’s best interest!