UK Property Sales Reach 16 Year High

Recent data from Her Majesty’s Revenue and Customs (HMRC) revealed  UK property purchases rose to a record high in March 2021 to levels not seen since 2005. Recorded property transactions for the month hit 180,690, which is more than double the levels experienced in March 2020 when the coronavirus pandemic first swept across the UK.

Average UK property prices also saw a significant rise to 8.6% year-on-year in February 2021, primarily driven by increased demand as UK property buyers look to finalise transactions before the end of the stamp duty holiday in June. The surge in UK property prices is the highest annual growth rate since October 2014, highlighting the influence of UK Chancellor Rishi Sunak’s decision to extend the stamp duty holiday from March to June.

The UK property market came to a standstill during the first half of 2020 due to COVID-19. However, following the recent rapid growth levels, Nicky Stevenson, Managing Director at Fine and Country, likens the UK property market to a parallel universe existing alongside the gloomy reality the UK has experienced over the past year.

In addition to the stamp duty holiday, UK property demand has also been fuelled by the ‘race for space’, which has seen buyers hunting for larger homes with substantial gardens, likely due to the rise in remote working and Government advice to stay at home where necessary.

As of February, the ONS indicated that the average house price in the UK was GBP 250,000, a GBP 20,000 increase from the same month the previous year. During this period, the average property price in England grew by 8.7%, 8.4% in Wales, 8% in Scotland and 5.3% in Northern Ireland. The North West of England reported the sharpest property price growth increase with 11.6%, whilst London recorded the smallest price growth with 4.6%.

However, there are a handful of areas where property prices have seen a decline in the UK, with Westminster seeing the steepest drop of 5.6%, which is a GBP 56,575 hit. Other UK areas experiencing slumps in property prices include Cambridge with 1.5%, Hartlepool with 1.4% and Stratford Upon Avon with 0.5%.

Andrew Montlake, Managing Director of Coreco, claims that the extension of the stamp duty holiday has turbocharged the UK property market, with the recent launch of the UK Government’s 95% mortgage also providing a boost. Mr Montlake also highlights that the shifting priorities of UK property buyers could continue to drive demand, with current homes no longer suited to the evolving work-life balance provoked by the coronavirus pandemic.

Whilst the UK Government’s current policies appear to be supporting the UK property growth in the near term, it has also been contended that too much Government interference could be detrimental to the UK housing market. Bloomberg columnist, Matthew Lynn, argues that it could be more beneficial for UK property if the Government were to take a step back.

For the past 30 years, the UK Government has developed numerous schemes to make UK housing more affordable, from the Help to Buy Scheme to tax breaks for landlords. Mr Lynn compares the ever-changing strategies to a ‘bewildering merry-go-round’ and questions how the UK property market would react if left alone to recover by itself.

Whilst UK property buyers are currently benefiting from the current stamp duty holiday; new tax rules introduced this month will affect individuals buying UK property from overseas.

stamp duty holiday

2% stamp duty surcharge for overseas buyers purchasing UK property

New tax rules introduced from 1st April mean that overseas buyers looking to purchase UK property will have to pay a 2% stamp duty surcharge. The new rules will run alongside the current 3% surcharge for those looking to buy a second property in the UK, introduced in 2016. As a result, overseas investors who own other properties elsewhere in the world will be liable for both surcharges, which would total 5% stamp duty.

Jonathan Hopper, chief executive of Garrington Property Finders, states that the additional stamp duty is unlikely to deter wealthy property investors, although it could hinder plans for speculative buyers with smaller budgets. Mr Hopper highlights that despite the increase, the UK’s property taxes are moderate compared to many other countries. Additionally, there is the ability for stamp duty to be deducted from the international investor’s UK capital gains tax bill when looking to sell the property.

Further data from HMRC outlines that overseas landlords of UK property have increased by 19.5% between the tax years 2014/15 and 2018/19 despite Brexit and the stamp duty surcharge for second homes. This trend suggests that the additional tax is unlikely to be a stumbling block for international property buyers.

Whilst an increase in UK property bought by foreign investors is positive for estate agents, it also creates further competition for UK buyers in a climate where demand is already incredibly high.

According to predictions from Rightmove, the demand for UK property is set to continue for the remainder of 2021.

UK property boom

UK property demand outstripping supply

Online property portal Rightmove stated that they added a significant 145,000 properties to their website during April. Although new homes are constantly being added to the website, Rightmove has identified that the UK’s current property demand is outstripping supply.

While it remains uncertain as to how the UK property market will fare once Government support winds down, Rightmove predicts that high demand levels will continue for the remainder of 2021. This view is supported by the course of the property market in Scotland, where demand remains high despite the end of the Land and Buildings Transaction Tax holiday.

Rightmove confirmed that during the first two weeks of April 2021, it took just 45 days for properties to sell, which is the fastest rate the website has ever recorded. Furthermore, nearly one in four properties had an agreed sale in March, having been on the market for less than one week.

Rightmove has also claimed to have recently received over 9.3 million visits to the online property portal in one day as buyers desperately seek to find their perfect home. Richard Freshwater, Director at Cheffins estate agents, has highlighted that the current lack of stock on the UK property market is the highest level seen over the past 20 years. Mr Freshwater revealed that there is such significant competition for UK property that sellers have resulted in taking sealed bids from buyers before settling on the highest offer.

If you are in the process of property hunting, it’s vital to ask estate agents the right questions when viewing a house to ensure you get a complete picture of the property. Home moving services website, Really Moving, advises property hunters to question whether any buyers have pulled out of purchasing so far and the reason for this. It’s also recommended to ask why the current owners are selling the property and if they have encountered any difficulties with selling. Asking if any issues with the property have been outlined on previous surveys can also help you assess whether the property remains a valuable prospect.

With competition for UK property reaching significantly high levels, it can be tempting to secure a seemingly attractive deal as soon as possible. However, with buying a property likely to be the most expensive purchase of your lifetime, it remains crucial to do your research to ensure it remains a valuable investment in the long term.