We are continuing to see strong activity in the housing market, with lead indicators showing that over the past 4 weeks the number of sales agreed throughout the UK has been some 26% above this time last year. This increase reflects both the release of pent up demand and a greater resolve to move among those with the financial resources to do so, following the experience of lockdown.
Although activity levels have been strong, in recent weeks both Nationwide and Halifax reported falls in the average value of UK homes in June. Nationwide have also reported that annual price movements have now dipped into negative territory.
The temporary stamp duty land tax (SDLT) relief, introduced to help maintain momentum in the housing market as the furloughing scheme ends and the economy gets back on its feet, effectively exempts the first £500,000 of a property’s purchase price from the underlying rate of SDLT until 31st March 2021 in England and Northern Ireland. Lifting the barriers to moving home will improve sentiment, and unlock more transactions. Further details can be found here.
For a purchase at £300,000 this will represent a £5,000 saving (one already available to first time buyers), while for those buying a property for £500,000 or more it will result in a £15,000 reduction in transaction costs. We have updated our stamp duty calculator to reflect these changes.
For those buying second homes or investment properties, the 3% additional homes surcharge will still apply to the entirety of the purchase price.
In a similar but less pronounced move, this afternoon the Scottish Government announced that they will raise the zero rate threshold for the Land and Buildings Transaction Tax from £145,000 to £250,000. This will result in a maximum potential saving for home-buyers north of the border of £2,100. We await further details including the date from which it will be implemented.
We are also waiting to see if and how the Welsh government will make similar changes to the Land Transactions Tax.
In the prime housing markets, activity has been even more robust. According to our analysis of data from TwentyCI, there have been 2,682 sales agreed at over £1 million in the past four weeks, which is 49% higher than this time last year, having risen by 8% last week.
Our second client survey has allowed us to explore the drivers behind this activity and our key findings are set out in our blog and this short video.
We have noted that a fairly widespread re-evaluation of people’s work life balance underpins a greater commitment to move over the next 12 months. However, of those buying today, almost half are taking a fairly short term view on future house prices, i.e. two years or less, so the market remains price sensitive.
Our prime house price indices show that in the second quarter of this year, average property values have fallen by 1.1% in London but remain unchanged elsewhere in the UK. As ever, these averages hide the pricing variations for different property types in different locations, with demand currently strongest for family houses along London’s wealth corridors and prime country property. Further details can be found here.
While activity has picked up in the prime central London markets, it has not done so to the same degree as in the rest of the prime market, in part due to the effect of international travel restrictions. Following this recent activity, we have revised our forecasts for prime central London. Our forecasts for other parts of the market can also be found here.