COVID19 is battering the economy. Brexit has happened. There is no telling what 2021 will bring and yet the housing market is forging ahead. According to the Halifax House Price Index average house prices have increased 7.6% in the year to November and 1.2% between October and November. This begs the question of why house prices are rising.
The Stamp Duty holiday
Possibly the most obvious reason why house prices are rising is the Stamp Duty holiday. Quite simply, by making most buyers pay less to HMRC, the Treasury left them with more budget available for the offers themselves.
If this is the only factor driving the housing market, then its effect should begin to wear off very soon. The offer is due to come to an end on 1st April 2021. That’s basically for three months. What’s more, the Stamp Duty holiday only applies to purchases completed before that date. In other words, the conveyancing has to be finished.
The great escape to the country
The great escape to the country may be a bit of an overstatement. There is, however, clear evidence that home buyers want more space. On a like-for-like basis, bigger properties tend to cost more than smaller ones, hence average house prices could rise, possibly substantially, at least over the short term.
Over the long term, however, there are a lot of variables to consider. One of the most obvious is the question of what happens with smaller properties? If their owners hold on to them, then the strong house price rises could continue, fuelled by the sale of the larger properties.
If, however, their owners lower the prices to get rid of them to someone, then prices could level or even fall. A lot would depend on how many smaller properties were sold and at how much of a discount to what you would expect given pre-COVID19 housing trends.
The remote working issue
The question of whether or not the appetite for more space continues may depend largely on the question of whether or not remote working becomes an established part of the (post-COVID19/post-Brexit) “new normal”.
At present, this is literally anybody’s guess. It is, however, worth noting that COVID19 has forced companies to support remote working. This demonstrates that it can work at least to some extent. The question is, therefore, really whether or not companies see any benefit to it once the current pandemic is consigned to the history books.
The answer to that question is likely to be “it depends on the company”. Some companies may be only too eager to get their staff back into the office. Others, however, may be looking at the cost-savings of reducing their office space and the opportunities offered by being able to extend their recruitment process beyond their local area.
Seizing the moment
Another possible reason why buyers are so active now is that they don’t know for sure what’s going to happen in the future. Since March 2020, the UK has essentially been in various stages of lockdown in various parts of the country. Buyers (and sellers) might have been motivated by the thought that they might not get another chance to move any time soon.
If this is the case then, again, it’s debatable how long this stimulus will last. Up until recently, talk of a vaccine has been largely just that talk. Now, it seems to be making its way into reality. Depending on how this progresses, it may calm the nerves of buyers (and sellers), who fear being trapped in an unsuitable home for another lockdown (or more than one).
Your property may be repossessed if you do not keep up repayments on your mortgage.