With the Stamp Duty Holiday winding to a close, it’ll soon be time for the housing market to go back to standing on its own two feet. It’s always managed this pretty well in the past. Can it keep ploughing ahead now?
The drivers behind house-price growth
Since July 2020, the UK has seen extraordinary house-price growth. Given the timing, it seems reasonable to assume that the SDLT holiday was a factor in this. The key question, however, is whether or not it was the only factor. If it was, then, at a minimum, house-price growth should stop. If it wasn’t, then house-price growth should continue albeit possibly at a slower rate.
Why were people moving?
Anyone who’s ever moved home knows just how much hassle it involves. What’s more, even with the SDLT holiday, it’s generally an expensive undertaking. The SDLT holiday, for example, did not cut the costs of mortgage applications, valuations and conveyancing. Similarly, it did not cut the costs of physically moving from A to B.
It, therefore, seems fair to assume that the SDLT holiday simply prompted people to get on and do something they were planning on doing anyway. This raises the question of why they were doing it.
Upsizing and downsizing
If you need more space than you have and can’t extend then moving is really your only option. If you have more space than you need, then moving can be an attractive option. Less space generally means less cleaning and maintenance. It can also mean less cost.
Of course, if you’re really short on space or really have too much of it, you will effectively be forced to move. If, however, you’re just about managing, then you may need an incentive to go through the hassle of moving home. The SDLT holiday might have been the boost you needed to get moving.
If this is the case then it’s questionable whether house prices can continue to rise over the near future. Quite simply, if the majority of people who needed or wanted to move have done so recently, who is going to be buying new houses? Of course, it’s to be expected that there will be some activity, for example from first-time buyers, but will it be enough to sustain growth?
Changing location
The need to change location might be forced on you or it might be through choice. In fact, it might even be a bit of both. This might have been the case for a lot of people in COVID19. Remote-working became the new normal. Remote-/hybrid-working is looking increasingly likely to be the new frontier of knowledge work. That has serious implications for the housing market.
Although some employers have spoken out against remote working, many others are interested in it. They may not be prepared to go 100% remote (although some companies are). They may, however, be perfectly happy to switch to a hybrid model. This allows employers to reduce the cost of office space while still maintaining a base for meetings and collaborative work.
It also allows employees to move further away from their work location if they wish. In fact, it may strongly motivate them to do so to get the space for proper home offices. If this is the case then demand may continue after the SDLT holiday ends. Some employees may have been waiting to see what their employer’s long-term policy would be before committing.
Investing
People buying second (or subsequent) homes still had to pay the surcharge but they qualified for the main SDLT holiday. If this was one of the drivers behind the price rises then it’s questionable whether or not price growth will continue.
Investors need to make their numbers add up. It’s hard to see how they can make suitable returns buying houses at high prices without the benefit of the SDLT holiday to offset them.
Please contact us for mortgage advice.
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