The global pandemic, which caused people across the nation to be ‘stuck at home’, not only led to the rapid increase in people purchasing new pets and hoarding toilet paper at an alarming rate, but also prompted many to re-evaluate what they desired from their home environment.
Many responded by carrying out home improvements whilst a significant number chose to sell their homes and move, especially given the extension to the SDLT holiday to 30th June 2021 and the introduction of a 95% mortgage guarantee scheme for first-time buyers ending in late 2022.
The extended SDLT holiday has resulted in a tax-free threshold of up to £500,000, with this being reduced to £250,000 from 1st July 2021 until 1st October 2021.
Data from HMRC shows that there were 190,980 sales completed in March 2021, which is nearly double that of March 2020. This spike was almost certainly caused by buyers rushing to meet the original stamp duty holiday deadline of 31st March 2021.
Working from home now appears to be a less temporary arrangement and numerous businesses are permanently changing the way they work to include home-based workers. Consequently, many employees have sought houses that are more conducive to home-based working; for example, having a larger house, which includes an office space and not being restricted having to be located within an easily commutable area.
These new considerations have led to a substantial increase in people moving away from urban areas towards more rural parts of the country and is reflected in the uncharacteristically small London house price gain, which was only 3.7% in the year to March, compared to Yorkshire and Humber, which rocketed by 14%. The Office for National Statistics stated that the average price for detached properties has increased by 11.7% until March, while flats only gained 5%.
What is the future likely to look like and what external factors may affect the housing market?
Although the global pandemic seems to be largely under-control, there remains uncertainty about variants and regional outbreaks, which may result in more periods of lockdown.
Home-based working, where possible, is therefore necessary for businesses to ensure workforce stability and continuity. The extension of the SDLT holiday until the end of June, undoubtedly led to an increased demand for property and subsequently, is likely to keep house prices high over the next few months.
There is likely to be some house price easing that is commensurate with the staged reduction in SDLT relief and compensating for an otherwise large increase in purchase costs. To put this into context, house prices soared by 10.2% in March 2021, up from 9.2% in February 2021, which is documented to be the largest annual increase since August 2007 by the Office for National Statistics.
In conclusion, the effect of Covid-19 on the housing market was unpredictable and unprecedented. Now that companies are embracing home-based working and generally establishing ‘new’ ways of working, thus offsetting the consequences of lockdowns, the housing market is likely to stabilise, especially as the SDLT holiday is phased out.
However, we can be assured that the housing market will remain active given the numerous incentives to attract young people as first-time buyers and those with properties may be more inclined to sell as the markets settle and they are less likely to ‘hang-on’, waiting for prices to peak.
The future looks bright with plenty of opportunities for movement within a more stable housing market.