According to House Price Forecast research from reallymoving.com, annual house price growth in the UK is set to jump to 11.4% in October 2020, compared to -1.4% in August 2020, based on house sales that were agreed in July 2020.
The surge is due in part to the stamp duty holiday put in place by the government and in part to increased demand post-lockdown. Zuneth Sattar has an interest in the property market and manages a large residential property portfolio as part of his role as Director of Xavier Investments Limited.
The unprecedented factors of 2020 have come together at the end of lockdown to create a surge in housing demand and housing market activity, resulting in the growth of house prices. However, reallymoving.com’s Chief Executive Rob Houghton commented that the price hikes are likely to be short-lived.
Stamp Duty Holiday
The stamp duty holiday was introduced by the UK government as part of the package of measures designed to reboot the economy following the enforced period of lockdown in response to the coronavirus pandemic.
Stamp duty is a tax payable in England and Northern Ireland by anyone purchasing a residential property over a certain value, or in some cases land with planning permission for residential properties. From the 8th July 2020 until the 31st March 2021, stamp duty will only apply to house purchases with a value exceeding £500,000.
This compares to a usual threshold of £125,000 and means than around 90% of all house sales during this period will not be subject to stamp duty. The measure was put into place to help sustain the housing market activity rebound and stimulate more home sales. It is hoped that the money saved by property buyers will be funnelled back into the economy in the form of spending on home improvements furniture and white goods.
Property Purchasing During Recession
The government’s stamp duty holiday should help revitalise the housing market in the UK in the short-term, although some experts are predicting sales will ultimately fall over the coming full year.
One chartered surveyor advised potential buyers to remember that purchasing a house is a big decision with long-lasting consequences and not to jump at the first mortgage offer or low house price without analysing long-term affordability. However, some banks are already said to be preparing a loss buffer as schemes such as furlough come to an end, to enable them to work more closely with customers who may be struggling to meet mortgage repayments.