In this newsletter we look at how the property market is reacting after the measures taken in the budget and as we start to see light at the end of the Covid tunnel.
There’s excellent news for people who are looking to sell their homes this spring. March is traditionally the start of the spring selling season, and this year it’s got off to a very strong start. In the first week of the month sales are already up by 12% compared to the same week last year. Rightmove is reporting record numbers of potential buyers enquiring about every property currently on the market. Compared to this time last year, just before the country went into lockdown, demand is calculated to be 34% higher. The high level of demand is being fuelled by several factors.
Firstly, the extension to the stamp duty holiday until the end of June and the three month tapering of relief thereafter will have encouraged many buyers to enter the market now in an attempt to beat the new deadlines.
Secondly, the government backed 95% mortgage guarantee scheme is set to launch next month. This scheme is available to all buyers providing they are buying a property up to a value of £600,000 for their own use. Both new build and existing property is eligible. Major lenders including Barclays, NatWest, HSBC and Santander are already on board and more are joining the scheme. An added attraction of the scheme is that lenders will have to offer borrowers the security of five-year fixed rate mortgages.
Thirdly, working from home, at least on a part-time basis, looks like being one pandemic lifestyle change that is here to stay. Consequently, there continues to be strong demand from people looking for larger properties in areas that would traditionally not have been regarded as commutable to city centre offices.
With two-thirds of properties on agents’ books already sold, buyers are anxiously waiting for new property to come onto the market. It is undoubtedly a seller’s market at the moment. The recommendation to homeowners thinking of putting their property on the market is to act now to take advantage of current market conditions.
Various data sources are all showing market prices continuing the rise. According to Rightmove, the last four weeks alone have seen an average increase of 0.8% in property prices. The Land Registry UK House Price Index, which works on a two-month lag, shows that there was an 8.5% rise in prices in the year to December. Meanwhile, major lenders Nationwide and Halifax have also reported annual price rises of 6.9% and 5.2% respectively in the year to February.
Looking forward to the rest of the year, some industry experts are now upgrading their annual price increase predictions to between 4% and 5%. However, others remain more cautious, pointing to the current limitations on borrowing imposed by strict lending criteria, plus the steadying effect on prices caused by a gradual increase in stock. It is hoped that by the autumn when stamp duty tax breaks finish, the recovery in the economy as a whole will continue to support the housing market.
Turning our attention to London, it’s a city of two halves. Outer London is continuing to benefit from the trend for home working first necessitated by the pandemic. Prices have risen by 4% in during the last six months and this trend is expected to continue as hybrid working becomes the new norm for many. However, demand for property in the centre of the capital is continuing to be affected not only by outmigration but also the continued travel uncertainties which keep international buyers away.
Property prices in central London remain flat, with annual price increase forecasts down to 2%. Some areas, particularly in the West and North West of London, continue to see price reductions. However, industry commentators are predicting that activity should return to the central London property market in the autumn as the economy recovers, travel restrictions are lifted, and international buyers are able to return to the PCL market. Many sellers in this market are holding back in anticipation of a return of more normal market conditions and higher prices.
The central London rental market is continuing to suffer from an excess of supply over demand, with rental incomes affected accordingly. The recent changes in working patterns have resulted in renters switching from inner to outer London and this trend is expected to continue. Savills don’t expect the excess supply of rental units in central London to disappear for much of 2021 and consequently aren’t predicting growth in rents until 2022. The advice is for existing landlords to be flexible about rents in order to keep their tenants in place and to ensure that their property is in the very best of condition to take full advantage of a return to a stronger market.
Now may not seem to be a good moment for new landlords to enter the central London buy-to-let market, but some might be tempted by the current lower prices of central London flats. These may well return to favour in the longer term and a current tenant can provide a steady income in the shorter term.
It is reassuring to know that, despite recent changes in our lifestyles and priorities, London looks set to remain an attractive place to live and work. A recent study carried out by Boston Consulting Group and Totaljobs has revealed that London is still regarded as the “most desirable” city in the world for international workers who were surveyed across 190 countries.
The capital’s strong housing market, rich cultural life and the NHS all contribute to its appeal. Despite the impact of Brexit, London still enjoys a reputation as a city offering strong employment and trade opportunities, especially in the media, financial, insurance and legal sectors.
“Industry commentators are predicting that activity should return to the central London property market in the autumn as the economy recovers, travel restrictions are lifted, and international buyers are able to return to the PCL market.”