This blog provides a summary of the property market since it reopened in May 2020 during the pandemic, as well as an insight into what the future might look like.

A summary of the property market during the pandemic

The outbreak of the COVID-19 pandemic brought widespread economic uncertainty – a stark contrast to the property market which has been booming since it reopened in May 2020.  The stamp duty holiday has certainly helped in contributing to the buoyant market as well as an increased desire for buyers to swap urban living with country living due to more flexible working patterns.

The stamp duty holiday

As the market reopened, Chancellor Rishi Sunak unveiled a Stamp Duty holiday for main homes valued up to £500,000, in a bid to increase property sales. Without it, the ongoing coronavirus crisis would have severely dampened confidence in the market.

The surge in residential property sales

Residential property sales in February 2021 surged as home buyers rushed to meet the initial end of March 2021 deadline to pay less stamp duty, according to government figures. Figures released by HM Revenue & Customs  showed that there were 147,050 residential property sales in February, 48.5% increase on the same month in 2020.

Chancellor Rishi Sunak used his Budget at the start of March 2021 to extend the stamp duty holiday deadline to 30 June 2021 for properties of up to £500k, and to the end of September for properties of up to £250k.

House price increases

House prices have been rising and according to the Land Registry, the average price of a property in the UK rose by 10.2% year-on-year in March 2021 to reach £256,405, as shown in the graph below.

London continues to be the region with the lowest annual growth (3.7%) for the fourth consecutive month.

Research by Rightmove found the average time to agree a sale in April 2021 was 45 days, the lowest figure registered since the start of the pandemic.

The imbalance of supply and demand of housing leading to a strong seller’s market

As more people started looking at moving home, this has increased the demand, and led to a shortage of available properties. The continued imbalance of supply and demand is a concern and has led to a strong sellers’ market with properties being snapped up quickly at high prices, especially in sought-after locations.

As buyers are having to pay higher prices for properties, they are not in reality benefiting a great deal from the stamp duty holiday, but the thought of not having to pay the lump sum of £15,000 stamp duty is very appealing.

What is in store for the property market post-pandemic?

Such rapid growth would, to an extent, be self-limiting, given the increasing difficulty faced by first-time buyers. They are having to pay more to get on the property ladder. Lenders are encouraging them to put down a 15% deposit instead of 10%.

There are two factors that support further growth of the property market.

The first is that lockdown has, if anything, fuelled already traditionally high demand in the UK for homeownership and in some cases a greater ability to save. New figures show that 80 per cent of private renters are now saving for a deposit.

The second is the newly launched government-backed mortgages which offer help for those struggling to raise sufficient deposits. Announced at the Budget (March 2021), the scheme involves  the government ‘guaranteeing’ 95% mortgages for buyers with 5% deposits.  It is designed to encourage banks to start offering 95% mortgages again, after nearly every single one was withdrawn during the pandemic Under the terms of the scheme, the government guarantees the portion of the mortgage over 80% (so, with a 95% mortgage, the remaining 15%). In practice, it just means the government will partially compensate a lender if a homeowner fails to pay their mortgage.

It is available for purchases of up to £600,000 by both first-time buyers and previous homeowners. It joins other existing schemes such as Help-to-Buy Shared Ownership and the First Homes Scheme in helping sustain the market, particularly among first-time buyers.

Eventually, we can expect the market to slow. The tapering, the end of the furlough scheme and then removal of the stamp duty holiday will mean less frantic activity.

As we move to the latter half of the year, attention is likely to shift to remortgaging as borrowers look to lock in low interest rates. All buyers will have to be prepared to use a stamp duty calculator to factor in potential stamp duty costs, should they not complete on their purchase before the deadline.

Advisers will also start to look to the future and a post-pandemic normal.

At Beaufort Mortgages, we find the best mortgage rates for First Time Buyers, Home Movers, those looking to Remortgage and landlords requiring Buy To Let mortgages. Get in touch with Dan Godfrey, our independent mortgage adviser.