The property market has seen an impressive bounce back since the first lockdown ended in May 2020. With covid-19 restrictions in Q1, the year was looking pretty bleak for the property market and all the types of businesses that fall under this umbrella, including estate agents, construction companies, surveyors, builders, financiers and more.
But following some new policies by the Chancellor, including a stamp duty cut, the market has surged and property prices have seen the highest levels in 5 years.
According to figures from Nationwide, the average house price in the UK rose by 5% in September compared with the same month last year, to £226,129.
The stamp duty cut has offered 0% on any property purchases valued £500,000 or less – something that has sparked a huge wave in acquisitions and mortgage approvals, especially amongst young and first-time buyers.
But according to an article this week in the Telegraph, economists and property experts have warned over the potential hangover that awaits when the stamp duty cut ends in March 2021.
“The property market shows signs of growth when actually the economy is in recession. This does not add up.”
Economist Andrew Wishart tells The Telegraph that we should expect a 5% fall in house prices next year, largely because the furlough scheme has buffered incomes but around a quarter of these people are expected to lose their jobs. Hence, people are looking to buy new homes or upgrade without knowing their employment certainty.
Jon Di-Stefano, chief executive of Telford Homes continues that next year ‘banks will be worried about unemployment levels’ and less likely to give mortgages to people that actually need them. You are going to be faced with challenges if unemployment goes up and you cannot use the Help to Buy Scheme. “Even with the arrival of the vaccine,” he continues, “it will take a long time for the market to fully realign itself.”
Dan Kettle of Octagon Capital, a bridging loans company, commented: “The property market shows signs of growth when actually the economy is in recession – and this does not add up. People want to do business and they want to upgrade their homes, hence you have an increase in mortgage approvals and property prices. But has it come too soon?”
“There is so much uncertainty still remaining that indicates we should have been taking this slowly. Another wave of infections or rise in unemployment could see a lot of bad mortgage debt and further restrictions for the next generation, ultimately causing the hangover that The Telegraph has suggested.”
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Daniel Peacock.