It’s good to be back, bringing you a round-up of property news which we hope will be of interest. In this edition, we take a look at the effects of the imminent end to the stamp duty holiday, changes in the rental and sales markets in London and the latest property price and mortgage news.
There has been speculation that the stamp duty holiday on properties valued up to £500,000 might be extended beyond its current 31 March deadline. An hour-long parliamentary debate on the matter took place on 1 February. Jesse Norman, speaking for the government, hinted at the possibility that buyers who were ready but hadn’t achieved completion by 31 March might still be able to benefit from the tax break. If this is to happen, then it is expected details will be announced in the budget on 3 March.
In the meantime, many buyers are now involved in a race to beat the deadline and so secure savings of many thousands of pounds. The surge in sales since the break was announced has led to delays in the conveyancing process and many buyers may not complete in time. Rightmove has reported that there are currently 613,000 properties that are “sold subject to contract” but still awaiting completion. The BBC is putting the number of sales that could fall through as a result as high as 300,000.
Many estate agents are anticipating that vendors might be willing to negotiate on price to keep their buyers on board if the deadline is missed. Given the pressures of life in lockdown, many people
want to avoid the additional stress of a collapsed property sale and so may be willing to ease on price to avoid this. Largely driven by the looming 31 March deadline, sales remained strong in January 2021 with overall UK sales up by 12% compared with the same month last year. Zoopla reported that UK housing demand was also up by 13% in the first two weeks of January, whilst supply was down by 12%.
London, however, was an exception to this downward trend in supply. There has been an increase in the number of flats coming to market as more people are looking to move from flats to houses to accommodate working from home. Investors are also beginning to sell London properties as rents fall and speculation grows of an increase in capital gains tax in the forthcoming budget. Knight Frank’s latest data shows that house prices in prime central London fell by 4.3% in the year to January.
In common with other inner-city areas across the country, central London has seen a big fall in rents. Driven by an over-supply of short-term lets as students and corporate tenants stay away, Knight Frank reports that in the year to January PCL average rents fell by 13% and prime outer London rents fell by 10.7%. Rather than have long void periods, landlords are choosing to accept much lower levels of rent.
An interesting flip side to this phenomenon is that central London lettings agents are beginning to report a reversal of the “outmigration” trend. There are signs that an increasing number of renters are moving from the suburbs and into prime central London, as falling rental prices makes central London living more affordable than it has been for a very long time. Once lockdown is over, the opportunity to walk to work and places of entertainment, rather than take public transport, is seen as a big draw.
Indeed, many commentators are beginning to wonder if the demand for city centre living might slowly return as people tire of the limitations of suburban and rural life. London estate agents Dexters is predicting that as normality returns, PCL property prices could rise by 2-3 %.
A reluctance to use public transport is also affecting the prices of properties close to London tube stations. Historically, there was a price premium on properties with close proximity to a tube station. However, research carried out by estate agents Bentham and Reeves has revealed that, on average, there has been a 2% drop in prices on such property. Individual tube lines have seen
greater effects on prices, with properties near the Circle Line experiencing a 7% drop and those near the Northern, District and Hammersmith and City lines dropping by 4%.
There’s good news about mortgage availability. This has continued to improve for the fourth consecutive month and is now is at its highest levels since March 2020. There has been particularly strong growth in the 90% LTV market, but there has been an increase in choice across all LTV tiers. The only exception to this is 95% LTV, where products remain restricted. Mortgage rates across all LTVs have shown slight increases, with Moneyfacts.co.uk reporting increases in January of just 0.01% and 0.02% on two-year and five-year fixed rates respectively. The website is indicating that some stability in mortgage rates can now be expected.
Finally, news just released by both Nationwide and Halifax shows that average UK house prices declined by 0.3% in the first month of 2021. This suggests that, as predicted, the mini boom seen in the property market since the introduction of the stamp duty holiday is now coming to an end.
However, commentators seem confident that the market should remain active beyond the 31 March deadline. The continuation of the successful vaccine roll-out and the associated reduction in the R number is bolstering the belief that the economy will recover within a couple of years at most. Currently the government’s Office for Budget Responsibility is forecasting that the economy should take two years to return to its pre-pandemic levels, with growth rates of 5.5% and 6.6 % predicted in 2021 and 2022 respectively.
“Largely driven by the looming 31 March deadline, sales remained strong in January 2021 with overall UK sales up by 12% compared with the same month last year.”