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The future of the UK property market in post-Brexit 2021

Although UK Chancellor Rishi Sunak announced an extension to the stamp duty holiday during the Spring Budget, UK property prices growth is continuing to slow, particularly in London. Annual house price growth in the UK has slowed to 5.7% in March, down from 6.9% in February, putting the average UK house price at GBP 232,134. Data from Nationwide shows that London is currently the weakest region, with annual price growth dropping 4.8%, down from 6.2% in Q4 of 2020.

The data follows predictions from the Bank of England (BoE), which warned housing prices could decline by up 35% over the next three years after the UK departs the EU.

Although the coronavirus pandemic triggered one of the most economically turbulent times in recent history, UK property prices stormed to record highs in 2020, with the average home costing GBP 253,374 in December – an increase of over GBP 14,000 on the previous year.

Meanwhile, housing prices across the UK have jumped up by 14.1% since the June 2016 vote, with the West Midlands, East Midlands and Wales seeing turbocharged growth.

However, with the UK still subject to coronavirus restrictions, concerning unemployment levels, and COVID vaccine rollouts being accelerated, the housing market activity appears to be cooling off.

Uncertainty surrounding how long the coronavirus pandemic will last, the UK’s post-Brexit future and the efficacy of vaccines has caused many to speculate what’s in store for the property market in 2021.

UK Housing Prices

UK government could restrict housing market activity amid Covid crisis

Though UK coronavirus cases remained stubbornly high during the third national lockdown, the UK government allowed the housing market to remain open during this period.

While strict rules have been put in place to reduce the risk of transmission, people can continue to move homessell and purchase property under the new lockdown rules.

The government has encouraged viewings to be conducted virtually unless the buyer is serious about purchasing the property in question. If physical viewings are taking place, sellers should encourage prospective buyers to wear face coverings and wash their hands’ when entering the property and follow social distancing measures where possible.

However, several people, including Labour Leader, Sir Keir Starmer, has criticised the government for its decision to keep the housing market open, given the overwhelming pressure on the NHS.

Sir Keir urged UK Prime Minister Boris Johnson to consider tightening restrictions further to pull the reins in on the virus, which has spread across Britain like wildfire.

That being said, coronavirus cases in the UK have continued to fall since February and the UK is on track to meet the restriction easing dates outlined in Prime Minister Boris Johnson’s roadmap exit strategy.

On 6th April 2021, 2,379 new coronavirus cases were recorded in the UK, down from around 12,000 cases each day in February.

According to a Property Industry Eye survey of approximately 3,400 readers, 62% believed that real estate agents should have closed their doors and ban physical viewings and meetings during the current lockdown due to the risk these new mutant stains pose to public health.

Shortly after Keir Starmer’s statement, Prime Minister Boris Johnson made a televised address to the nation, stating: “It may become necessary to pause all home moves locally or nationally for a short period to manage the spread of coronavirus.”

For many prospective homebuyers and sellers, shutting down the housing market would be bad news, especially with the prospect that the stamp duty holiday was due to end in March, though this has now been extended until the end of June.

Chancellor Extends stamp duty holiday to end of June

Housing market activity and rising property prices have been supported by Chancellor Rishi Sunak’s stamp duty holiday, which was initially scheduled to expire on March 31st.

Many industry professionals believed the termination of the stamp duty holiday, among other factors such as Brexit and rising unemployment levels, would weigh heavily on housing market activity, with house prices predicted to decline by 5% in 2021.

According to research carried out by London estate agent chain, Hamptons International, the government could unlock an additional 100,000 property transactions if they extended the tax break until the end of 2021. Whilst the stamp duty holiday has been extended until the end of June, it is uncertain as to whether there will be a further extension.

Hamptons International noted that the housing market’s growth would help shore up the broader economy, which has suffered the sharpest peacetime slump in nearly a century due to the pandemic.

Aneisha Beveridge, Head of Research at Hamptons, said that extending the stamp duty break would significantly benefit first-time buyers and second-steppers in the UK’s most expensive regions.

The stamp duty holiday provides buyers with the opportunity to save up to GBP 15,000 on a property, which triggered a wave of property purchases last year as homebuyers tried to take advantage of the relief.

With property prices expected to fall in the coming months as the pandemic’s impact hits the market and schemes wind down, a petition calling for the government to extend the stamp duty deadline by six months attracted more than 80,000 signatures.

The Telegraph also launched a Stamp Out The Duty campaign to support buyers at risk of losing out on their housing transactions due to the third lockdown.

Pantheon Macroeconomics economist, Samuel Tombs warned the housing market “will fall into a deep slumber” if the stamp duty holiday was to end in March. Many buyers were concerned about their transactions falling through. As a result, more than a third of prospective buyers have said they would terminate their sale if they missed the deadline.

However, it’s not all bad news as the rollout of COVID vaccines has increased mortgage availability and prompted banks to reintroduce 10% deposits.

Holiday let mortgages are being reintroduced in the UK amid easing of lockdown restrictions

Mortgage availability increases and mortgage deposits decrease

According to the financial information company, Moneyfacts Group, mortgage availability had risen to its highest level since April 2020, which was when the pandemic tightened its grip on the UK.

Lenders are also reintroducing high loan-to-value (LTV) mortgage deals, meaning more homebuyers will be able to secure a property with a 10% or 5% mortgage deposit.

HSBC becomes the latest lender to reinstate 90% LTVs in 2021, joining Lloyds Bank, Barclays, Natwest and Halifax – a boost for first-time buyers and other second-steppers with low deposit requirements.

While interest rates remain much higher than last year, several experts predict these will decline over the coming months as more Britons receive the COVID vaccine.

With more lending facilities offering high LTVs, homebuyers with low equity or deposits will have access to more options than they did last year.

Brexit Referendum

Brexit induces a dilemma for second homeowners

The UK’s COVID crisis and Brexit have created chaos for owners of second homes in the EU, with thousands of Brits having to adjust to new rules now that freedom of movement has ended for Britons travelling to Europe.

According to real estate company Taylor Wimpey Espana, the demand for property in Spain soared during the first week of January, with many Britons keen to escape the third lockdown and travel restrictions.

But with travel to Spain more complicated post-Brexit, many Britons seem to be setting their sights on homes in coastal regions of the UK due to the “nightmare” of owning property abroad.

However, the rise in second homeowners and tourists in the UK is causing dilemmas for local residents. Welsh Cabinet member Cefin Campbell said communities in Carmarthenshire had been left “defenceless” against the rise of second homes, which he claims has priced out locals.

Wales has now raised land transaction tax for second homes in Wales, which has triggered chaos in markets and pressure could increase further into the second half of the year.