Everybody knows that the Covid-19 pandemic has turned everything on its head. To say nothing of the numbers that have died with the disease, the economy has slipped into recession, businesses are closing down and substantial redundancies are being announced by the day.
So when it seems to defy all logic, many people are asking just why does the UK property market seem to be booming right now?
There are several reports that suggest a housing market boom is underway. For example ....
Property portal Rightmove say that the highest number of sales were agreed last month since they started compiling figures on this a full ten years ago. Total sales agreed exceeded £37 billion. They add that last month also saw the highest number of properties coming to market in a month in over 12 years.
The last Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey
says that 75% of their surveyor participants reported an increase in enquiries from buyers in July – the second consecutive month enquiries rose sharply. They say that new sales instructions also rose sharply alongside a rise in agreed sales – just short of two thirds of their survey participants reported a rise in both.
The last Halifax House Price Index says that house prices hit a new all time high in July as the property market gradually reopened.
So let’s take a closer look at what could be causing the property market to surge right now:
Pent up demand. Spring is always a busy time for house buying and selling anyway. Many buyers look to find a new house and move before they go on their summer holidays and before the kids start school again. That couldn’t happen this year due to lockdown, so the spring house buying boom in 2020 has been pushed into the summer.
This report from The Independent even suggests that Britons are filling the ‘holiday void’ this year by moving house instead!
The Stamp Duty holiday. The removal of Stamp Duty Land Tax on transactions up to £500,000 will be proving tempting to some buyers. Those who were considering a move anyway could be responding to the opportunity to save up to £15,000 in Stamp Duty until next March, and maybe even buy a property they didn’t think they would be able to afford.
Interest rates are low. Not just that, but they’ll probably never be so low ever again. Even with the economy and jobs market both being uncertain this could be persuading more people to move now – and pay down a bigger mortgage while it’s still cheap to do so.
It’s important to remember that not everybody has or will be affected financially by Covid-19. Those with a secure income, jobs or a business that has actually benefitted from Covid – or perhaps retirees downsizing from a house they own outright – could see this as a good time to buy.
Escape to the country. Covid has prompted some people to realise that living in urban areas, where Covid cases have been highest, has many disadvantages. Plus, more homeworking has led more people to realise that they don’t need to live in cities and easily commutable areas anymore. Daily commuting on public transport doesn’t seem quite so logical as it once did. Living in the countryside looks more practical and more appealing than ever.
Housing priorities have changed. Lockdown caused people to reassess their priorities in a place to live. Many people have realised they would like (or even must have) more space, and in particular more outside space. Local amenities, which you can walk or cycle to, are also more appealing too.
Renewed interest from property investors. Buy to let has become more difficult in recent years, due to higher costs and more government regulation. But ultra low savings interest rates and uncertainty about stock market performance may well have prompted investors to reconsider investing in property.
For example, a well-heeled investor with £150,000 cash to invest would only make £750 a year by putting their money into a savings account at 0.5% interest. A decent buy to let property earning just a 6% yield would make them £9,000 a year.
The impact of overseas property buyers. While the UK has been severely impacted by Covid, the pandemic has shown that it is generally very resilient. It is still regarded as a safe haven for your money by investors and residents in many other countries. Wealthy people from locations such as the Middle East, Far East and Russia still seem to be very interested in buying in the UK.
The really big question of course is whether the current property boom will last?
Most experts seem to agree that it won’t. The RICS UK Residential Market Survey says its respondents envisage sales slowing at the twelve-month horizon due to a difficult economic climate.
But – it’s important to remember that there really are no comparables to help make a decision here. No one can honestly say how long the Covid property boom will last, or what will happen next.