COVID Rewrites UK housing rule book

August 20, 2020

In June the UK property market was buzzing with activity. This was odd just re-emerging from Covid. But would that housing market activity translate into sales?

We are learning the rulebook has been rewritten as the post-lockdown mini-property boom accelerates rather than slows down.

There is normally a seasonal slowdown in housing market activity over the Summer months, as both buyers and sellers turn their attention to Summer holidays. This usually translates into a softening of house prices of around 1.2%, an August fall, which has been the experience for the last 10 years.

UK Property - Surrey Cottage

But this year, there is an un-seasonal record high for new seller asking prices in seven regions, although London drags down the national average to a 0.2% fall due to its own more typical 2.0% seasonal monthly drop. Prices are more buoyant in places like Devon and Cornwall as people seek out-of-city dwellings and prices reach record levels.

Rightmove’s August house price index shows the highest number of sales agreed in a month since over ten years ago, up by 20% on the previous high, with a record total value of over £37 billion*.

There is the obvious pent-up demand filtering through and perhaps people reassessing their housing needs

Rishi Sunak’s SDLT holiday until the end of March ’21 has stimulated, not just home buyers but property investors and expats too, trying to pre-empt a 2% SDLT surcharge levy being introduced April ’21 for overseas buyers. Overseas buyers will pay the new 2% surcharge in addition to the existing 3% surcharge.

The lending market has been jumping around a lot as lenders try to find their ‘new normal’ with LTVs lowering and deals being pulled. The ‘shifting sands’ creates problems for investors not knowing whether they can rely on a lending facility they thought was there. This looks as though it might settle a bit but then the big challenge is how will lenders behave come October when the ‘Furlough’ scheme ends and more unemployment bites.

UK Regional property market

As ever there is a regional and segmented picture, not just one national one. In the East Midlands there has been a 3% rise in property investor inquiries since the SDLT holiday announcement. **

London seems to be suffering the most for landlord returns, this can be partly explained by the fact that rents have gone up considerably over the last few years and so there is a rebalancing but also current supply in London isn’t matched by demand, whereas cities like Bradford and Sheffield don’t have enough.

Interestingly rents have been rising with the average rent up 1.5 per cent at £965 from June**

Don’t work right to the SDLT deadline

The reality is that record levels of buyer activity lead to processing delays and mean that patience is required to get sales agreed to completion so investors might not want to work right up to the deadline of the SDLT holiday

Source: *RightMove August 2020 ** Zoopla July 2020

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