UK property boom set to roll on as savings unlocked

UK property boom set to roll on as savings unlocked
Courtesy: Reuters

Britain's pandemic property market boom is set to roll on as government support for the roaring market continues and those who have managed to save money during lockdowns look for more living space, a Reuters poll found.

House prices rose at the fastest annual rate in nearly 14 years in March, official data showed on Thursday, after a tax cut and a mortgage guarantee scheme for first-time buyers further stoked a sharp surge in activity.

Prices will rise 5.0 per cent this year, the May 11-21 poll of 21 property market experts found, a sharp increase from a February poll which predicted they would flatline. Next year and in 2023 they will rise 3.0 per cent.

"The aftermath of the pandemic is likely to see sustained housing market strength into 2022, as a result of changed lifestyles, a desire for a fresh start, and tens of billions of 'accidental savings' made during the pandemic, much of which is likely to find its way into the housing market," said Mike Scott at online estate agent Yopa.

Eye on 2022

Britain has suffered the highest Covid-19 related death toll in Europe and thousands have lost their jobs.

However, with much of the service industry and non-essential retail closed for most of the past year, and citizens encouraged to stay home, those who remained employed found their outgoings were significantly reduced and were able to save more.

When asked how the risks to their forecasts were skewed, 11 of 14 said they were more to the downside. A slim majority – eight of 14 – said activity was more likely to slow down than accelerate in the coming year.

"This year's momentum will continue as the economy recovers very strongly. It's 2022 we need to be concerned about," said Russell Quirk at estate agent Keller Williams.


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Remote working impact

Prices in London, long the hotbed for foreign investment, were expected to lag the national market and rise 3.0 per cent this year. Next year they will increase 2.5 per cent and then by 3.0 per cent in 2023.

"London should see relatively weaker house price growth than the rest of the country, as home-buyers prioritise space and take advantage of the flexibility provided by new remote-working norms," said Harvir Dhillon at Experian.

Many Britons have sought to buy larger houses with gardens in less urban locations as they work more from home, the Office for National Statistics said.

But demand is returning fast for apartments and other city-centre property, which buyers had avoided during the coronavirus pandemic, a survey by online property portal Rightmove showed last week.

Structural review

"People starting to venture into their local high streets and once again experiencing the buzz of their city centres, along with greater mortgage availability for first-time buyers, means city centres are staging a much-needed comeback," Rightmove's director of property data, Tim Bannister, said.

During lockdowns most office-based employees have worked from home and many major companies have said they plan to extend that option, or at least move to a hybrid model, once restrictions are lifted.

So, when asked how demand would change for office space over the next few years eight respondents to an additional question said it would decrease and two said it would fall significantly. Four said it would increase moderately or significantly.

"We are seeing a structural review of office space across the country as more people work from home at least part of the week," said Gary Styles at GPS Economics.


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Tax cuts

Stamp duty – a tax on property sales – was cut by Finance Minister Rishi Sunak last year and the break, which was due to end in March, has been extended.

The first 500,000 pounds ($710,700) of any property purchase in England or Northern Ireland will remain exempt from stamp duty until the end of June, and there will be a £250,000 tax-free allowance until the end of September.

When asked how much of an impact the end to the cut would have on activity 13 of 15 respondents to an extra question said it would be significant or very significant. Two said it would be insignificant and none said very insignificant.


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