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UK House prices dip as stamp duty holiday ends

The real estate market has been at a peak ever since the Stamp Duty Land Tax holiday was announced last June. There has been a frantic scramble for people to benefit from this tax cut and buy their own homes, which, for many, had just been a dream. As a result, agents all over the UK, including the Lurot Brand Belsize Park Estate Agents, have been overly busy trying to keep up with the demand.

Now that the SDLT holiday is in its last phase, the cut-off date being end September 2021, there has been a slight dip in demand for property which consequently affects house prices too.

However, with the tax benefit up to the end of June applicable to properties valued at GBP 500,000, the applications during the year soared, and so did the house prices. The result was that, even though there was a slight slump in house prices in June, the overall average price was still higher than last year.

Until the end of September, there is still an SDLT benefit for the first GBP 250,000 on property price. However, this will end wef 1 October 2021, when the stamp duty will revert to the norm and be applicable only to the first GBP 125,000 on property prices.

Some have predicted that house prices will continue to fall, while others feel that the pent up demand and other perks will keep prices high.

Rush for Plush: 

Priorities for accommodation have changed after the lockdowns restricted people to living and working in their own homes. The yearning for spacious houses, with at least 2 to 3 bedrooms, office working space and a large courtyard for a garden and other means of relaxation has become a trend.

This has resulted in many people moving to a larger accommodation, and it looks likely that this will continue. If it does, then the bigger the property, the higher the price!

City areas: 

The movement to suburbs and rural areas has reflected in city house prices not rising at the same level. However, with the consumer market reopening and schools and universities functioning, there is a likelihood that the rental market will surge, causing inflation in city house prices as well.

Low-interest rates: 

It has become more accessible for people to make a deposit with the various attractive mortgage schemes being offered. One of them is the government’s 95% mortgage scheme, allowing the buyer to pay just a 5% deposit.

If more people take advantage of these benefits, the demand for housing will increase, and so will the price. But, on the other hand, if the prices get too high, it may affect the demand, resulting in falling prices.

Unforeseen savings: 

Curtailed expenditure during the lockdowns with hardly any consumer and entertainment spending led to unexpected savings. These have helped some prospective buyers to meet the deposit amounts for mortgages.

Clamour vs Stock:  

When the demand exceeds the supply, prices will remain high, as is the case in the present housing market. The pandemic seems to have caused a ripple in demand, as many people have said they are still planning to buy property even when the SDLT holiday ends.

Income: 

The end of September will see the closure of the SDLT holiday and the end of the furlough scheme. This could affect the incomes, which, naturally, will tell on expenses even for houses and property.

Alternatively, with the Covid vaccination programme well underway and return to business as usual predicted, more employment opportunities may become available, leading to more income which, in turn, could keep the housing market buoyant.

Race against time: 

Even though there are another 2+ months for the SDLT holiday to end, and people are still keen to take advantage of the tax benefit, many existing applications are pending, and it is taking longer for them to be processed. So it is likely that some people may decide not to buy if they are unable to meet the deadline.

Influences: 

The main impacts to reflect on house prices are incomes, credit availability, interest rates, supply of houses and any ownership tax advantages. While ROI (return on investment) is usually high on property investment, there is a risk as well. Impacts on the economy from unpredictable sources such as the pandemic, a financial crisis or soaring oil prices could cause property prices to slow down as investors reconsider buying.

Conclusion:   

It is difficult to accurately predict how house prices will be affected once the Stamp Duty Land Tax holiday ends. As mentioned above, there is likely to be a slump as the stamp duty benefits end wef 1 October 2021.

Alternatively, if the economy keeps rising with a consequent increase in income brackets, it will likely result in house prices remaining high. As one expert stated, “The housing market is currently like resale tickets for a sold-out show; in demand and overpriced.” Whether it will continue to be so remains to be seen.

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