The accepted wisdom always used to hold that every boom in property prices would end sooner or later. The market could not sustain continued increases. Prices would reach a point at which they would choke off demand. Income levels and the availability of mortgages would contribute their own negative pressures. Falling demand would lead to falling prices. This wouldn’t necessarily raise the grim spectre of negative equity last seen in the 1990s, when the value of some properties fell below what their owners still owed on them, but the market would inevitably cool.
We’ve been through a global economic crash in 2007. We’ve experienced another pandemic-driven recession in 2020. Unemployment has risen. Well-known shops have disappeared from the high street. Businesses have failed. But has the property market cooled?
Against the Odds
It seems not. According to HMRC, domestic property sales reached record levels in March 2021, double the total from a year before and the highest figure since it first published this data in 2005. The stamp duty holiday has no doubt played a big part in sustaining the market, but that has now been downgraded and is set to disappear at the end of June. Buyers seem largely undeterred. Demand for conveyancing quotes was 100% higher in March than the four-year average to 2021. Significantly, requests from first-time buyers for conveyancing quotes have increased even more sharply.
More Government Help
The Treasury understands the importance of a strong housing market for the wider economy, especially as the UK emerges from the pandemic, which is why it has devised a mortgage guarantee scheme to increase the availability of high loan-to-value mortgages. Meanwhile, consumer spending, which was heavily suppressed during the lengthy lockdown, can reasonably be expected to rise, and that could fuel a further boost. If that happens and you’ve been hesitating about whether to take the plunge yourself, then it may be a good time to talk to property professionals and start gathering conveyancing quotes. If the market isn’t going to cool, it may well heat up and leave you behind.
We seem to be witnessing a vigorous but apparently sustainable continuation of growth in the property market. The Office for National Statistics has released some very interesting data, and the Land Registry has published similar findings, and it’s impossible to argue with these figures: https://www.gov.uk/government/statistics/uk-house-price-index-summary-february-2021/uk-house-price-index-summary-february-2021.
This optimistic outlook is a far cry from insider assessments in March 2020. At that time the market seized up and many mortgage deals were withdrawn. That fearful initial reaction did not last, and a combination of government intervention and resilient consumer confidence has enabled the UK to shrug off the worst predictions of a house-price crash.