Phew, what a few months it’s been leading up to the June Stamp Duty deadline! So what will the market do now? Since spring 2020 the market has been predicted to fall, yet it’s done the opposite. Number of sales and prices hit a new high in June and while activity will slow now the deadline has passed, prices will likely remain strong.
While the summer months are usually quieter in the property market we’re not seeing much of a slowdown this year, here’s why.
The Stamp Duty factor
While the stamp duty holiday did increase sales, we were already seeing a busy market before it was announced last year, so activity was not just driven by stamp duty savings. In fact the main motivation to move over the last year has been due to lifestyle changes rather than finances.
Motivation to move
The motivations leading people to move are; more space needed for home offices, play rooms, elderly relatives and bigger gardens to enjoy, grandparents wanting to move closer to their children and grandchildren. This along with a steady stream of companies confirming staff can work from home full time or at least part time, freeing people up to move further away from their company offices.
This is not 2007
Crucially, people aren’t moving to make a buck in the housing market, contrary to the property crash of 2007. At that time we saw a boom in amateur landlords and people buying to flip properties in a year or two for a tidy profit. Few people did the sums accounting for increased interest/a drop in prices/a drop in rental value/redundancy and so when prices and household finances dropped they found themselves high and dry.
What we’re seeing now is people buying for a lifestyle, not a profit. They’re buying homes that will work for them and their families for the next 10, 20 or 30 years and their borrowing is at a responsible level, based on their true earnings and with FCA guidelines in place around affordability.
Added to this, while so many people have struggled financially over the last year others have made savings on work and leisure travel, dining out, entertainment etc. In some cases tens of thousands of pounds which can now be invested in property for an improved lifestyle in the face of ongoing social and travel restrictions. Anyone who used to commute by train from Newbury to London may be saving up to £10,000 a year on a season ticket and parking, which equates to almost £1000 a month more to spend on a mortgage. And of course borrowing rates remain very low and cost effective.
Demand vs supply
Demand still outstrips supply. With so many houses being snapped up in the first half of the year plenty of buyers missed out, sometimes on multiple properties. I’ve had quite a few calls from buyers about houses marked as under offer, checking that they’re definitely not available anymore as buyers struggle to find available properties that meet their needs.
Beware the self-fulfilling prophecy
I’m now seeing a notable number of people putting their homes on the market purely to capitalise on strong prices. In some cases houses are going on the market at unrealistically high prices (not with me I might add!). Say for example if 50% of houses are overpriced, these prices will eventually need to drop to attract a buyer. In this case we’ll see news stories reporting the likes of “house prices drop as market cools” which in turn triggers buyers to believe the overall market is falling, and so their offers will be lower. Gordon Gekko’s famous line “greed is good” is a highly debatable term, in the current market I’d caution sellers not to shoot themselves in the foot!
It remains the case that well priced, well marketed properties will sell in good time.
To discuss the sale of your home, feel free to call us anytime.