How Has Coronavirus Affected the UK Property Market?
Covid-19 has had a huge impact on the UK economy in many areas including effects on the property market across all types of property finance. With so much uncertainty and so many people seeing wage cuts, being placed on furlough or feeling a lack of job security due to the pandemic, it stands to reason that people might be hesitant to make big life changing purchases; like houses.
Across first and second charge mortgages in the UK, lenders have reduced the pool of borrowers they would usually consider. With increased volatility and risk in the property market and with no desire to enter into loan arrangements that may lead to borrowers defaulting on mortgages, mortgage lending has been scaled back.
There have however been more people than ever seeking to undertake home improvements, with many doing a DIY job and others looking for home improvement loans. With the mortgage market effectively paused for a period, accessing finance has been difficult, but for those with assets like a property, not impossible.
The UK property market has been hit hard by the restrictions imposed as part of the government lockdowns, with some of the biggest falls in house prices in 11 years. But now that the initial, first lockdown has passed and we are on the way to exiting the third, how has the UK property market been affected?
UK House Prices
Over the first lockdown, imposed in March 2020, house price fell month on month. However, the housing market seems to be recovering from the initial shock of Covid-19 and the lockdowns that have followed throughout 2020.
Since the housing market reopened in June, there has been a big increase in demand for housing. House prices in more rural areas have seen big increases since the first lockdown. Places like Cornwall have seen demand, and therefore house prices, increase dramatically, with Cornwall now being one of the most sought-after towns in the UK.
It would seem that many have realised that working from home full time is a viable option and that working from the seaside or countryside, and certainly outside of the cities is far more enjoyable and beneficial.
Stamp Duty Holiday
As of the 8th July 2020, Chancellor Rishi Sunak announced a temporary cut in stamp duty. The holiday was designed to give the housing market a boost and kickstart the UK economy by encouraging buyers to purchase homes to stimulate the housing market.
Through the holiday in Stamp Duty, the minimum Stamp Duty threshold has been moved from £125,000 to £500,000 in England and Northern Ireland. This means that the first £500,000 of the purchase price of your home will be exempt from Stamp Duty.
Although this doesn’t directly impact the UK second mortgage market, it does encourage indirect growth in the second charge mortgage sector. As more people purchase properties, remortgage and seek to renovate, more people will be inclined to seek out funding and finance which may present itself in the form of second mortgages.
This holiday has encouraged many people to purchase new homes, helping to restart the economy. However, many have speculated that these savings will not often reach the buyer as house prices may be increased to accommodate for the lack of stamp duty being paid.
What Are People Looking for When Moving in the UK?
Many people have begun to look for larger properties with extra space from which to work from home. Many have realised that working from home could be the new normal for some time to come and thus, having the necessary space is more important than ever.
Rightmove UK has reported a significant increase in people searching for properties further from towns and cities. As well as reporting that many people are now prioritising spaces and living environments with gardens and home offices as well as parks and green spaces nearby. Covid is starting to make us reconsider how we live and work, potentially ditching our commute to the office and living in quieter, more suburban areas.
What Will Happen Next?
In such turbulent times it is hard to say what will happen with regards to the UK property market. Many people are very concerned for the future of the high street, with rents rising and footfall massively affected by the pandemic.
The stamp duty holiday has been extended in full until 31st June 2021 then tapering down through the proceeding months, to allow more to take advantage of these savings. This is forecast to boost the UK economy and restart the housing market, stimulating some much-needed economic growth in the UK.