The snowball effect of the UK housing market reopening in May is still gathering pace. But there’s much more behind the boom than the stamp duty cut, new research reveals.
Demand across the property industry is continuing its steep ascent, according to the latest research. Buoyed by the government’s stamp duty cut, low interest rates and a surge of new sellers, buyers are keen to make their move in the sector.
Numerous sources show how the UK housing market has been remarkably resilient throughout the coronavirus crisis. The latest index from Nationwide, for example, indicates an annual house price rise of 1.5% in July. Month-on-month, there was a steep increase of 1.7%. HMRC data also shows transactions leapt by 14.5% between June and July this year.
Now, Knight Frank’s Residential Market Outlook analyses the strong and fast recovery of the sector. It also points out that behavioural shifts as well as a new favoured market are at play.
Prime property could be leading recovery
Prime property normally refers to the most desirable and normally expensive homes in an area. And it seems to be recovering more quickly at the moment than other areas, says Knight Frank. According to data from the agency and Rightmove, this market segment has seen the biggest rise in deals since the end of lockdown.
Knight Frank says that in the week ending 16th August, the number of homes sold above £1m was double that seen in 2019. The annual jump for properties valued at £750,000-£1m was even higher. In this bracket, there were 119% more deals than last year.
For homes worth up to £500,000, transactions were more subdued although there was still an uplift. Knight Frank and Rightmove’s research shows the number of properties sold subject to completion increased by 53% annually in August.
The reason behind the rise
One of the biggest trends we have seen since the end of lockdown has been a behavioural shift among buyers. The much-touted “escape to the country” is now even higher on people’s priority lists. Many people living in smaller homes in more urban areas are now looking for greener locations with more space.
Other needs are coming to the fore, such as larger properties with home office space. As these homes tend to come at a premium, this could partly explain why higher end homes are getting snapped up.
Knight Frank points out that it is also a case of history repeating itself.
“A quicker recovery [in prime markets] tallies with a similar trend which took place during the period that followed the global financial crisis,” says the agent.
Will it continue?
The prime market may have been gathering pace over the summer, but it remains to be seen how other market segments will perform by the end of 2020. Property portals have certainly noticed a surge in buyer interest since the stamp duty cut.
However, the actual effects of this will not become apparent straight away, as sold statistics take longer to come through. Therefore, while prime property is currently leading the way, we should expect to see a further surge in sub-£500,000 deals down the line as sales begin to register.
The report concludes: “A stronger recovery at the top-end reflects the fact that such buyers financial position means they tend to be able to transact more quickly, whilst more affluent households are also less reliant on lending.”
“For now, pent-up demand, the stamp duty holiday and extension of the furlough scheme all continue to support a strong recovery in the market.”
